ABSTRACT CONSIDERATIONS ON DEVELOPMENT AND THE POULTRY INDUSTRY IN PERU BY Guillermo Santiago Burga The present Government of Peru is politically com- mitted to overall develOpment of the country. In order to achieve that goal, it is fundamental to establish a clear understanding of development and for all economic sectors to cooperate with those efforts. In the present thesis, development was considered in the broad sense of expanding opportunities and the human capacities needed to exploit them, along with a general reduction of mass poverty, un- employment, and equality. The objective of development can be stated better in terms of the growth of inputs and out- put. Therefore, it can be said that Peru is a developing country. A description has been made of the poultry industry including breeders, broilers and table egg producing farms. The supply of key inputs for the industry has been surveyed, encompassing credit availability, breeding stocks and hatch— eries, feed manufacturers, feedstuffs, and other inputs like vaccines and government technical assistance to the industry. Guillermo Santiago Burga very little accurate information is available on the market- ing of poultry products. An effort was made to describe imports and exports, consumption, supply and marketing channels, existing processing plants and reported prices for poultry products. The National Development Plan: 1971-1975 will be implemented after the recent reforms in land tenure have taken place. Low income segments of the population have been favored with the h0pe that their incomes will increase. Income elasticity of demand for animal products reportedly is high at those income levels. Effective demand for higher cost, better quality protein food will expand due to the larger population, the expected increased incomes, and bet- ter education. Poultry products can capture a share of this expanded effective demand if priced competitively. Poultry meat supply was projected to be doubled and egg supplies to increase by almost threefold in the five year period. Dur- ing this anticipated growth process, the poultry industry should also contribute to the development efforts of the country. In order to build a conceptual developmental frame- work for the Peruvian poultry industry, the following guide lines are proposed: - Improved technology is transferable to the Peruvian poultry industry Guillermo Santiago Burga - New entrepreneurial forms can help transfer some of the fruits of the new technology to the workers - The poultry industry's improved technology can encourage expansion of the domestic feedstuffs industry - The benefits of new technology can be distributed to Peruvian consumers. CONSIDERATIONS ON DEVELOPMENT AND THE POULTRY INDUSTRY IN PERU BY Guillermo Santiago Burga A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Poultry Science 1971 ACKNOWLEDGMENTS The author is most grateful to Dr. Robert K. Ringer, Professor of Poultry Science, for his guidance in selecting the author's course of study. He is also indebted to Dr. Henry E. Larzelere, Professor of Agricultural Economics, for his guidance of the research project and for his constructive criticism of this dissertation. Sincere appreciation is expressed to the Rockefeller Foundation, New York, U.S.A., and to the Universidad Nacional Agraria--La Molina, Lima, Peru, whose financial support made 'this study possible. The author also wishes to express his appreciation to all the members of the Department of Poultry Science, Michigan State University, for their continuous encourage- ment and moral support. ***** ii TABLE OF CONTENTS ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . LIST OF TABLES . . . . . . . . . . . . . . . . . . Chapter I. INTRODUCTION . . . . . . . . . . . . . . II. OBJECTIVES . . . . . . . . . . . . . . . . III. UNDERSTANDING DEVELOPMENT . . . . . . . . . IV. v. Training of Graduates from Developing Countries . . . . . . . . . . . . . . . The Meaning of DevelOpment . . . . . . . Development Economics . . . . . . . . . . Targets for Development . . . . . . . . . Development Planning and Policy . . . . . Guides to Practical Action in Latin America . . . . . . . . . . . . . . . . PERU'S NATIONAL DEVELOPMENT PLAN: 1971-1975 Foreword . . . . . . . . . . . . . . . . The Revolutionary Government's Concept of Development . . . . . . . . . . . Fundamental Aspects of the National Problems . . . . . . . . . . . . . . Objectives, Goals, and Strategy . . . . Summary of the Agricultural and Animal Production Plan . . . . . . . . . . . . OUTLOOK OF THE SOCIOECONOMIC SITUATION OF PERU: 1960-1970 . . . . . . . . . . . Basic Data . . . . . . . . . . . . . . . Recent Economic Events . . . . . . . . . Institutional Reforms and Social Progress The Problem of Demographic Growth . . . . The Impact of the Current Agrarian Reform iii Page ii 12 24 57 75 95 97 97 102 104 105 124 136 136 139 149 165 175 , ....u' . .- .o-ovt Chapter VI. THE PERUVIAN POULTRY INDUSTRY . . . . . . . . . General: The P. I. D. U. A. Report . . . . . . Some Laws Affecting the Poultry Industry . . Poultry Production Firms . . . . . . . . . . Supply of Inputs . . . . . . . . . . . . . . Marketing . . . . . . . . . . . . . . . . . . VII. THE PROPOSED GUIDELINES FOR THE POULTRY INDUSTRY TO CONTRIBUTE TO DEVELOPMENT OF PE RU O C O O C O C O O O O O O O O O O O O The Situation . . . . . . . . . . . . . . . Improved Technology Potentially Transferable to the Peruvian Poultry Industry . . . . . The Design of New Entrepreneurial Forms Could Help Transfer Some of the Fruits of New Technology to the Workers . . . . . The Poultry Industry's Improved Technology Can Encourage Expansion of the Feedstuffs Industry . . . . . . . . . . . . . . . The Benefits of New Technology Can Be Distributed to Peruvian Consumers . . . . . VIII. SUMMRY O O 0 O O O O O I O O O O O O I O O O O 1. Understanding DeveIOpment . . . . . . . . 2. The Peruvian Poultry Industry . . . . . . 3. Poultry Industry Developmental Framework . . . . . . . . . . . . . . . . . LITERATURE CITED 0 O O O O O O O O O O O O O O O O O 0 Appendix A. TABLES O O O O O O O O O 0 O O O O O O O O O O B. GRAPHICAL REGIONS OF PERU . . . . . . . . . . . iv Page 185 185 203 214 229 266 285 285 289 305 327 341 352 352 354 356 359 365 393 . '3." ’7'. I ’. 0...»...|..'.‘ ‘ a - _ . \’V~~. 'H -..-'.‘.‘I’ A. ._..-’: u- :t-.__‘ o '9. _. —. ‘_._. .-- -"‘u _ n u....¢.u---. - "“‘ s- D. -‘ ' 0‘55. .... ‘ 0 ' ‘ ‘I‘l o‘¢.' ..‘ I . - ‘Q ' ‘ : ‘. u.‘.~ ,. ..Q. ‘-~. 5 d . c. ‘ .. ' o .‘w- - . Q.. .“ §§~‘~f‘ ‘ .A -‘ ‘. , ‘- ‘. - ‘ K §,'. ‘. . I 0.. -"~ ~. .-I.1- . c .,- l . , n‘. 1 ‘."~‘ 5,... ‘ ‘ . ~ ‘. c".~. . c P; ”Q ‘ h‘..~ . H. . .‘s. ‘ ‘Q 5‘. a \._-. ~- u. . 5 ~.‘-. -9 .. - “. ~‘ ‘ fi . . Q, ‘ “. . s .O C ‘ A -‘ .‘ __- s. - .~“.: .. . .“ ‘- ‘- I ~.‘ vstz‘ ‘ ‘- u a ':.>‘ u- . ‘.O n‘ .. ~~ ‘ o .21., u‘ . - ‘. \ ‘ — ; ~- . Q‘. ‘. .v“ ’ u‘ ‘ . ‘ ' a f..- ‘s u u. “ . h‘ ‘a‘.“ g \. K ‘\ ‘ Table 10. 11. 12. 13. 14. 15. LIST OF TABLES Employment goals for Peru . . . . . . . . . Structure of the Gross National Product by sectors and rate of growth: 1971-1975 Growth goals for Gross Domestic Product, consumption, and Gross Domestic Investment: rates for 19 70-1975 0 O O I O O I O O 0 Public investment by productive sectors Goals of the balance of payments: 1971-1975 0 o o o o o o o o o o o o o o o 0 Increase in the general level of prices: 1961-1975 . . . . . . . . . . . . . . . Employment goals: 1970—1975 . . . . . . . . Agricultural commodities, production gOals: 1970-1975 c o o o o o o o o o o o 0 Balance of payments, agricultural sector . Agricultural sector imports and exports . . Supply and demand of fats and oils: 1971-1975 0 O O O O 0 O O O O O O 0 O O O Apparent domestic supply and apparent domestic demand for meats . . . . . . . . Perfi: basic data . . . . . . . . . . . Perfi: Savings and Loan Associations: 1962-1969 up to September, 1970 . . . . Perfi; pre-primary and primary school enrollment: 1964-1970 . . . . . . . . . Page 111 113 114 116 117 118 125 126 128 128 130 131 137 152 156 - .-- E o‘“‘ . 4- .5... sU. ' o O;VV‘ ’“F' \‘M g: Table 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. Perfi: middle-level school enrollment: 1964-1970 0 o o o o o o o o o O o o 0 Classification of land in the Peruvian territory 0 O O O O O O O O O O O 0 Reported legal status (ownership) of poultry producers . . . . . . . . . . . . . Reported land tenure pattern of the poultry fams O I O O O O O O O O O O O O O O O 0 Reported type of management of the farms surveyed o o o o o o o o 0 Q o o o o o o o 0 Reported type of poultry health care in the farms surveyed . . . . . . . . . Reported additional technical assistance received by the farmers surveyed . . . . . Types of poultry housing in the farms surveyed . . . . . . . . . . . . . . . . . Reported kinds of poultry disease control . . Composition of the reported poultry papulation . . . . . . . . . . . . Reported data on broiler production . . . . . Reported data on commercial layers . Poultry population and farms . . . Poultry farms, by types of enterprise Peru: number and value of poultry imports, from 1967—1970, including country of origin Numbers and types of chicken breeding stocks, imported and domestically produced . . . . Hatcheries: most important plants in Peru Perfi: production of baby chicks, 1961- 1970 O O I O O O O O O O O O O O C O O 0 vi Page 157 167 221 221 222 222 223 223 224 224 226 227 228 228 233 235 237 238 .. nsbvtoh‘ ‘n . . . - _ ‘ a:' V.“ '~.'.b~. A . .... ... " ‘u Ir- a-. , '_ C \"'“O r; .h..'.‘.b ‘.,, ID. 0". . . a ‘F.. ~ '--.-o “‘ .;-":—.‘ '».-n _ - ”It. q ~ 'b.‘.. -“ 'I .1. I. - .. .‘II ‘ 'I "s. - F- s. ‘1...” \ ~: . a . ' -_‘:. ' ...... . . '..- -. I . o.". v... .'. 0.. .l.‘ O . . u ' -."\. .' ,..-"~ ' . g ‘Q .,' On. " .‘1_. 15‘ . Q .-...‘ . s "--..;-. -‘I- Os, - a N. f...’ .. ‘u ' o . . I\‘ 0,. " ‘ O '- I n.- » ~.,* ’- ‘b. A... O . O u .0 . s ." 7‘. ‘ -.. ' I ' _ a... a ... “h... .. § h'- \ ‘~’ “-.I~.‘- ._ _. ..‘ I. 4‘ . u 5.. A-“ _ v.“‘ .- ‘I ‘4 v . .v ”'1 ‘ . 0. {~- -‘ n ‘ ‘ 5. ' U 5 . 5- . u o_ u‘- ~~‘ ". C .. ‘ ' c ‘- .u'k,- I‘ s.h q I 'I . o..~ .‘ C h.“ . ‘0 ‘ c. , .. “‘F 1 § Table 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. Reported data on commercial hatcheries . . . . Most important feed mill plants in Perfi . . . Reported balanced feed production, 1963-1968 . . . . . . . . . . . . . Structure of the animal feed industry, 1966 O O O O O O O O O O O I O O O O O O I 0 Corn: cultivated area, average yields per geographical region, 1967 . . . . . . . Corn: cultivated area and total production, 1960-1967 0 o o o o o o o o o o o 9 Prices paid and use of corn in balanced feeds: 1964-1968 . . . . . . . . . . . Fish oil: production and exports, 1966- 1969 . . . . . . . . . . . . . . . . . . Anchovy fish meal: production and exports, 1966-1969 . . . . . . . . . . . . . . . . . . Cottonseed meal actually distributed by the Peruvian Association of Cattlemen: 1965-1969 I O O O O O O O O O O O O O O 0 Projected needs for feedstuffs, 1975-1980- 1985 O O O O O O O O O O O O O 0 O O O O 0 O 0 Poultry meat marketed through different channels, 1970 . . . . . . . . . . . . Marketing of meat type chickens by types of channel members . . . . . . . . . . . . . Marketing of old layers for meat by types of channel members . . . . . . . . . . . . . . Peru's monthly average retail prices for proteic foodstuffs in the Lima market: November 1969 to October 1970 . . . . . Hypothesized.outflow of foreign exchange which domestic production could alleviate foryear1975 vii Page 239 240 242 244 252 253 253 257 259 261 264 269 274 274 283 340 o. S 2. .t v. a. — a :. 2 t. L. -. v. 3‘ .r .o S 3 I .2 : 2 _._ .. 4. 1.‘ «e .. .3 H: .1 5 .r .‘ s 1— .t i t 2 .: t I I A. L. .t .3 - .e. s ‘_ T. .2 I: E S 1 2 I ; i I. r .2 ‘—§ 5 .2 ~ 1‘ a» ;: 7.1 :1 I: 1 It .: \~ :~ §.. I .2 i t .2 . a .1. ‘ _. E a. I .: .: : »~ Fx . .‘ .3 .. L.‘ .‘ .... ‘s 1‘ s~..‘ .: ... .‘.: u.‘ \\ s‘.‘ Table A-1. A-10. A-ll c A-12. Normal variations in economic structure with level of develOpment-level of G.N.P. per capita . . . . . . . . . . . . . . A classification of development strategies of high growth countries . . . . . . . . . Projected annual geometric growth rates in gross domestic income per capita, 1962-1970 and 1970-19 80 O O O O O O O O O O O O O O O The regional distribution of national income and population in 1961 . . . . . . . . . Peru: population by regions and by urban and rural areas, 1950, 1960, with projections for 1970, 1975, and 1980 . . Indices of per capita human consumption by products and by regions, Perfi, 1964 . . . . A comparison of linear engel curves relating total per capita expenditure on food to total expenditure per capita, for six major Peruvian cities, 1964 . . Results of the urban household surveys: income expenditure elasticities and relative importance of expenditures, 1965 Percentage of total food budget spent on cereals and derived products according to per capita income levels by cities, 1965 . Percentage of total food budget spent on meats and preparations according to per capita income levels by cities, 1964 . . . Average annual per capita consumption of selected food groups in urban and rural areas according to the nutritional surveys of the Ministry of Health, 1960 . . . . . Peru: calorie and protein equivalent of the direct human consumption, 1960-1964 with projections for 1970, 1975, and 19 80 O O O O O O O O O I O O O O O O O 0 viii Page 365 366 370 371 372 373 374 375 377 378 379 380 . .. ‘ E. ‘8 - O. D b. u.“' . I - . ‘";':~- t-'~o—-‘ . . . .I‘ u! . . .. .,. ‘ . ‘::d- u. —. ‘ :IOI'.. "~-...' . ‘ C . y ‘ p... "v- ‘ 06-. ~.h- 0 ~vs._ .' . _ _ ~§‘. ‘.‘. '—‘ c-‘ a Q-.- -'.. ~ -.I.- _. - ... \;'..._ . . .- '.. _“‘ o--,._‘ ; ~ ~ ‘»u.'..~ . “v ‘~. ‘ .-. 9 ‘V .\ . ~~.« ‘ . Q .. ‘ -..~’ . I 'n u ‘u o. '~ . O . O U-' ‘ -u. -..I ‘ ‘.._ c r.‘_ ~ “- ~~.‘ . “,“. \‘ - ‘j:‘ o. . .- ..- ‘ .- ‘- '\ . ._\ .“ a ‘ ““ ~- _ o . \ ~_‘. ~ .v“. v- _ .‘. ‘ a o ' O :: -. . '— ‘- k .V ‘I‘“ ‘ " -s ..‘ -D- ¥ -~ ~‘, 5‘ “ “ ‘ ~: ‘Q ‘ . ‘v .I ‘ Table A"13o A-14. A-ls c A-16. A-17. A-18. A-19. A-20. Net supply per caput: food, calories, protein, 1962-1963 . . . . . . . . . . . . Average income elasticities for six rural areas by commodity groups . . . . . . Expenditure/income elasticities and quantity/income elasticities for region food products by regions and by rural urban areas of Perfi . . . . . . . Gross requirements for direct human consumption of major livestock and derivatives,and fats and oils, by major regions for 1960-1964, with projections for 1970, 1975, and 1980 . . . . . . . Annual geometric rate of growth of the gross requirements for direct human consumption of major livestock and derivatives, and fats and oils, by major regions, 1960-1964 to 1970, and 1970 to 1980 . .. . . . . . . . . . . . . . . . . Peru: annual geometric growth rates of projected domestic apparent demand 1960- 1964 to 1970, 1970 to 1975, and 1975 to 1980 . . .. . . . . . . . . . . . . . Actual and projected production of live- stock products from 1950 to 1980 . . . . . . Perfi: balance of domestic apparent demand with national production for major livestock products for 1960-1964 with projections for 1970, 1975, and 1980 . . . . . . . . . . . . ix Page 381 382 383 385 387 389 390 391 r '; 9,... Au. 5...; o - .. ~.. .~ 'In- -1 -Au. $.- -. 'r‘ a c CHAPTER I INTRODUCTION The present Government of Peru is politically com— mitted to overall development of the country. In order to achieve that goal, it is fundamental to establish a clear understanding of development and for all economic sectors to cooperate with those efforts. In the present thesis, develOpment is considered in the broad sense of expanding opportunities and the human capacities needed to exploit them, along with a general reduction of mass poverty, unemployment, and inequality. The formal training of Ph.D. candidates from devel- oping countries should pointedly be oriented towards making them think very deeply on questions basic to an effective attack on the problems of develOpment, since these problems are of urgent and vital importance in public policy issues. Gross National Product, which is the money value of current production of goods and services, needs to be reexamined in its acceptability as a yardstick for measurement of the level and rate of development and as the criteria on which public pOIiCY decisions are made. Few people understand development in these terms. I :-~ ~: n:OU .' ‘ ‘QVF. ,.. Inn -_ ' ‘ , " auto. ad. 0' . ‘ ‘ . ‘ .‘ .DCD. “4.. r- . I . .‘ ~un.‘¢ ht - .--.:q. 'n i: . u...¢.c. QVA» - ' - Q n a ---. .. ;.-.. “"fi- v. unoos. . a”... ‘7 ‘v- . ‘53-‘- u... "‘ . ~.-.. s. .9 .. — -~u....‘ .v H. -v- "‘I - . - 9 ~ .. H'“ II» .. .1 ‘..':"‘§ . Anx. .cu.._:‘ 0 ' . ' vs- ‘ \, ~ ' v . .. b-.." ‘ ‘u._ ‘ . .' 0.- ‘ '. ' “‘. .- .- . .' ‘0‘. . _- - u ‘1' I O. ‘- ‘ M“ ‘1 ‘O-‘nV‘. . .“" a . . ‘ D W : -‘ ‘ ‘.~ ‘ ~u . .. .‘ . . ‘ .‘ . ..‘~ . C ‘ -.\-.. . v.‘ §..‘ -‘. . "- . b. ‘- .- .s.’Z .’ .‘ _ ‘ ~ N h...» ‘ x“ .h'b "- ~-_. “ ‘I i. ‘ ‘5 "‘~‘ t. ‘ ~ ‘~ \§ I u ~ I. \_. - o ‘ a l I Q \ ‘. ‘ - I‘ \ ~_ 4 .. _ ‘- I O . O 'N .‘ x " :1 - ‘Q \ \. . Q- " \- ‘.v " ‘ ~ “ § § _ bfi . ‘ o . ‘. ~s‘ b- ‘n -‘ D. v.. 5 hi.-'- ._: - ~ “~ ‘ “ a: ‘1 n‘ ‘ 1‘.- 5‘ s. . -- ‘2. . N -o . x O ' S “ ~- . \. ~ . t ‘ ._ Perfi is a very large net importer of food crOps, neat, and dairy products. The Peruvian Government in its "National Development Plan: 1971—1975" has assigned an important role to the poultry industry for alleviating the deficit of edible animal protein. During this anticipated economic growth process, the poultry industry should also contribute to the development efforts of the country. When he has returned to his home country, the foreign-trained "expert" will be asked the question: What are your policy recommendations for the poultry industry to further the development of the country? This thesis is an attempt to search for those answers, recognizing the con- straints of limited availability and timeliness of specific empirical information, and the lack of recent first hand exposure to the current dynamism of changes in the envi— ronmental conditions. First step in this study will be to establish an understanding of develOpment. Peru's National Deve10pment Plan: 1971-1975 and the Outlook of the Socio-Economic Situation of Peru: 1960-1970 will then be examined in detail to comprehend the future expectations and the cur- rent situation of the country. In addition, a description as detailed as feasible of the Peruvian poultry industry will be made. Lastly, some guidelines will be outlined for the poultry industry to contribute to development of Peru. CHAPTER II OBJECTIVES 1. To establish an understanding of development in its broadest sense, including not only the economic consid- erations but also social, biological, and institutional factors poultry for the a. in government policy making. 2. To gather some insights into the Peruvian industry structure, behavior, and performance. 3. To build a conceptual develoPmental framework Peruvian poultry industry: To ascertain if there exists improved technology which is potentially transferable to the Peruvian poultry industry . To investigate if the design of new entrepreneurial forms could help transfer some of the fruits of new technology to the workers. To determine if the poultry industry's improved technology can encourage expansion of the domestic feedstuffs industry. To ascertain if the benefits of new technology can be distributed to consumers. CHAPTER III UNDERSTANDING DEVELOPMENT Training Graduates from Developing Countries The formal training of doctoral candidates from less developed countries should pointedly be oriented towards serious consideration of questions basic to an effective attack on the problems of deve10pment, since they are of urgent and vital importance in public policy issues. In analyzing the relevance of development economics to development, Currie (1965) indicated that it is at the heart of public policy issues in non-industrialized coun- tries. In reference to the training of Ph.D. candidates in United States universities, specifically, he pointed out: If a student's formal course training is limited to two years of graduate study and he expects to work on develop- ment problems, he is in danger of finding that he has acquired a lot of mental luggage of dubious utility while he has not been expected to think very deeply on questions basic to an effective attack on the problems of develOpment. It is not really an answer to say that you are giving him his analytical tools and that his thinking can come later. V up lh ‘- .ul‘ 1 0‘. n. ‘ v...,.. _ . a... ‘ I .4. .- u ‘ . . a v. . 'V 0 o If he has not been made aware of the basic issues in his university training, he may well pass through life unaware of their very existence. The limited relevance for the deve10ping countries cm some dissertation tOpics chosen by their native graduates when studying in universities from developed countries has deserved concerned criticism. UNESCO (1969) reported three nmin ways in which science and technology in the advanced countries affect the deve10ping countries: the internal brain drain, the external brain drain, and the composition of the stock of knowledge and its economic consequences. The orientation of science in the less developed countries is often influenced and determined by objectives which are relevant to the advanced countries, but which are external to the developing countries themselves and which have little enough to do with the requirements of develOpment. The result is the internal brain drain, whereby a substantial part of the scientific work going on in the deve10ping coun- tries, in addition to being under-financed and poorly orga— nized, is irrelevant to the environment in which it is being done. The external brain drain is the large scale migration of highly qualified personnel from developing to developed countries. This migration is encouraged by the intensive development of scientific and technical activities and the demand.it generates for qualified workers; it is also asso- ciated win: the incapacity of scientific institutions in the ' n .- ‘O‘.~ H». in -4. :ov:.“: .. loaninguh _, ‘ ' O . .'-A ..‘ .- . Io - . . ‘H by... . ..- .._.._. ‘. . — ‘ "~"-.'..”. ‘- ' I - -. _.-' u‘h .Il‘-'bl- ‘04. "‘ ... 1.... . ‘ -§‘ .— _ ~.'~' i».-- '9 ‘ n »...J o. .- ‘ 5' h... x‘. ;.:‘6.. . .‘. ‘ § ' 1 ..'I . “s ~." »__~ ._- I_‘ . . Q “. --..':: :.‘_ ‘.. ”q .~ ' I .. '1. ‘ . § "'~ “ v.-‘ Q. - ‘ I ‘. -6— s, . « . . V“: §'.‘ ‘ .‘- ._. “ .~ . h ‘D a ‘- 0‘ ~_.. . ‘y c. - \ . |‘ a n . ‘ w. v- .. ‘v n V ‘ ‘. “I ‘ 0.. O. . :‘ ‘Na. ‘ I ,- u '- O ‘ H -. O ‘ 's -_ t. 0-. ‘- ‘. ~! .A . -_ 5‘ u Q‘“:~ . developing countries to absorb and use scientific workers. The outfnxt from the third level education is increasing in the deve10ping countries at roughly two to three times the rate of aggregate economic growth. Unless some way is found cm bringing the employment possibilities for trained people into line with their increasing numbers, this means educated unemployment and/or international migration. Thiesenhusen (1968) reported that in 1966, U.S. colleges and universities graduated about 6,000 students from less developed countries. In that same year, 4,390 scientists, engineers, and physicians from these countries migrated to the United States, giving a net gain to the less developed countries of only three in ten. These migrations of university trained professionals was valued as an U.S. $88 million contribution to the United States. A higher calculation would be more realistic since this figure includes simply the cost of their education and not the potential value of their abilities. Besides, the profes- sionals from less develOped countries who migrate to the U.S. have job experience, while new graduates usually return home or go to a third country, as required by their exchange visitor visa. How many of these remigrate after the termi- nation of the two years they are required to spend out of this country is unknown. _ ’ ...--p~~ no .~ ( 0 . ‘un ~--v o . canci'fifl :I'I o -.-i-o.1- ‘10‘ . a V.— O. . 5- .- . O Na...' -c..‘ . 0-..- __u- ' It. N n a ' “'.. .\ -..: _ "-s u. .1 o.'.-. u- " .."-. . s, ‘. , . ‘.. 5‘ ...--‘ c ‘4: m. “‘ .u ~ ’5, . V..... . ’\ ‘a- c“. . .h‘L.-.‘ - o I. . c n"" I'.’ , . 4'! I O J I' l — — — — 9! UNESCO (1969) indicated that the adverse composition of the stock of knowledge is shown by the large gaps in scientific and technological knowledge that would be par- ticularly relevant to the deve10ping countries. Important technical problems have been left neglected and unsolved by the present concentration and orientation of scientific effort to the political and economic objectives of the advanced countries. The stock of scientific and technolog- ical knowledge is proportionately less directly suitable for use by the developing countries. The new technology empha- sizes production methods which are suitable for capital-rich, and unskilled labor-short countries. The developing coun- tries by contrast are short of capital and skills, but relatively rich in labor. This discrepancy between the resource-mix for which modern technology is increasingly designed, and the actual resource-mix in the developing countries places them at an increasing disadvantage. The available technology emphasizes production on a large scale whereas the initial markets of developing countries, even including their realistic export markets, are usually small in economic terms. Also, products, design of plant, equip- ment and consumer goods emphasize the needs of the richer industrialized countries. Finally, a very great deal of world scientific and technological effort is concentrated in industries which simply do not exist in the developing countries, and.which will not exist there for many years to m c ‘. .-. Dov-‘- . , . - a. -.e ---v:: ‘9- ...cco. Go. a. . a I no “7..” vu cue- \- A.. - . -.. . . .. .. s . d‘ u- ‘1 -s.... .__“v.‘ a.- v , u in nu u.-~_‘.' . O I... .I- ‘I .- § . -.‘---. . ‘ - -'~ ... a a "s 5‘ 'e. ' Ov- Q - H '.\ . x . _‘ ‘.~ "~ g s‘ I“, ‘ \.q. \‘ Q. .‘ ‘ n. Y- \‘I-.- ‘ . t:‘§.' ‘0 . f i J . . - § . . . ‘ - ‘c"'- u ‘0fiufl h u 1 . 4 ‘ .\‘ q.- \,"a C“ ‘ d‘ h ‘ N.~Ip - t‘ ‘- .. . . .‘.‘. ‘- g \ ‘~ . ~ . ‘ "u ‘ O ‘I V C .. ‘ I “. p‘.~ ‘ . ‘ . ‘NF .‘ .. ,. ‘I .‘ ;‘ ‘« ; -~ ‘ .- 5 «F' ‘ ‘ fl \ come. The products of scientific research in developed countries are often such that they exert harmful "backwash" effects on the economics of the developing countries, i.e., the development of synthetics of primary interest to the advanced economics. Many scientists from developing coun- tries probably have contributed in such research efforts. When the advantages and benefits of further develOpment of synthetic substitutes.are considered, the harmful effect on the producers and exporters of the primary commodities thus diSplaced is not normally taken into account. In the mean— time, work on the development and improvement of natural primary commodities of special interest to the deve10ping countries does not receive the emphasis it deserves. Thiesenhusen (1968) in discussing a long run "brain drain" policy for the United States, indicated that of all students in Latin America, only 2 percent enter the univer- sity and perhaps 1 percent finally complete their course work. There has, as yet, been no dramatic progress in introducing democratic equalization into the process of education, and a pupil from the lower social class still has very little chance of making his way to college. Meanwhile, the university educated person may cling tenaciously to his newly achieved respectable niche rather than spearheading the change that development requires. The implication for graduate study of Latin Americans in the United States was that,in order to prevent exacerbating the brain drain by graduate training here, the U.S. must concentrate upon those :--.I can» -. . . § ' . "uh—u. “V - a . -».-.s~-. v.1.“ , v' n '- 'Inb...‘ ‘5‘. out-.- ,,.A _ ' \II ' ,. §u —.a.. ”w it. I: ‘r- o‘- . ,, -. ..\ .y a» :- ."‘;o~u. I . .1 u I...'“ .‘. -‘.' .2 I :.."n I §.. .u“.|: .k- 'I ‘ .Du. u“ ‘ I‘ . ~ h a“.....‘ .- . \ \ V '71 (7' '1' U! I w or, V‘ Of. | . “\ students who are development oriented, those who are dis- satisfied with the status quo and willing to make the sacrifices which a rapidly changing situation may demand, and.those who are not interested in higher education solely as a way to achieve the higher status that accompanies education in the United States. Graduates returning to their native less-developed countries may find that their U.S. training may have been less than appropriate for needs at home. While catholicity in the physical and biological sciences is certainly more general than in the social sci— ences, in one very important sense it is at least premature in both. While all academic fields have certain assumed or proven truths, priorities for training and research (ad- vanced degrees are usually considered research degrees) within disciplines often must vary from one country to another. It appears that some departments do not always judge these priorities adequately when training foreign scholars. The same author indicated that there are a dispro- portionate number of students from less developed countries who work on basic problems, answers to which interest the entire community of scholars in a discipline, as Opposed to applied problems, whose solution is quite specific to the home country. The origin of such emphasis could be in the university system of the less developed country itself; some students may come to the U.S. to train themselves in fields , . . «v“ 'A ha u ' I O '1“ C! ‘0‘”. Hub '4' -V' all. :‘xc 4’ a on mu. 5 Q . .. a ”'DOI'n‘ ~ ' .'.04.'.'\‘ £... 2: a - ":_q . ‘ now»-.. . ~ “ .» . ‘-- . “" ; R’a , O b... p . ‘Q.. --.:. -.“:e~ o..... \ ., W ' ‘-o. ‘.._..v-" --- __ ‘ \-.- .‘t‘b-j v - \’ I ”v a... " v- I I: I. _ . “f L‘o ' 9‘. . v. Q § u ’o.:‘ ‘5 o I ~.. ( - - ~ ‘..‘, ‘_'I. ‘v 1 . _~ Q \ .‘I u _"I \‘-'§ -.‘. n. - u ‘. c .. . u'.I-~’ ~ “ . ‘2. . s.‘~ » ‘ .‘ . K); ~‘ s R ‘ u‘ ‘. r; . ‘1- EN ._ . . \. \.‘ ‘ ‘ - A ‘ ‘1 “A ..d K t.- “ \‘. ' D \ N ..‘ Q a 5‘- .~\ - 1 10 for which they have no special calling and for jobs that will not exist at home until much later in their country's development process. Frequently, these students have little respect for work on applied problems, and this attitude is only reinforced by study here. Too often, universities in less deve10ped countries have little contact with the com- munity and the problems it faces. They should remunerate well scientists whose work most contributes to a local develOpment need. Also, recognition should be given to the fact that most foreign and U.S. students are not at the apex of their disciplines and perhaps should not pretend to be. The neglect of applied issues causes wasteful gaps in sci- entific knowledge which may make basic work premature and even inapplicable. If the goal of science is to serve mankind, the scientist must focus on its most pressing contemporary problems. If not, the theoretical constructs of scientists will not correspond to reality. Pinto and Sunkel (1966) reported that some econ- omists from less deve10ped countries are so taken with the current pioneering emphasis on systems of analysis and game theory that they attempt to explain the intricate workings of their economies with transplanted models of doubtful applicability using unsure statistics and unproven functions. But one must raise the question: At this stage of develop- ment, should not economists utilize their expertise for improving statistics and understanding the rural farm and "‘ ‘unna ‘ i \ .1 I.-.-...,. ' . ‘ l a. ‘.P v- ”8...... ‘ .‘O ‘ ' "‘ on... . .- ~-~ Il‘v. top. -. . .\ “.... '~ l." .n :2: :v'; ‘.b 'V . l (I) I'- If! 1 11 community microeconomy, with its large subsistence or semi- subsistence sectors, which are less glamorous and nearly unexplored areas of endeavor? Thiesenhusen (1968) indicated that fortunately there is no need for contemporary research in less developed countries to move from applied to basic areas in a progres- sion exactly like the one followed in the U.S. in an earlier era, because the backlog of accomplished research in devel— oped countries makes it possible for some of these tech- niques to be transferred to less deve10ped countries at low cost. Sophisticated methodology and existing theoretical constructs not always attack the most important problems and sometimes are not even applicable. Often problems are chosen for research simply because they can be tested with a SOphisticated technique, not because they are priority issues of difficult quantification. Among the reasons for the difficulties that U.S. universities find in training foreign scholars were cited: U.S. professors have found little financing for efforts to prepare themselves to work on international research prob- lems in less developed countries and gain needed experience overseas. Professors may feel they cannot alter the course material to fit a foreign minority of students. Professors may feel the need and the pressure to require students to delve into investigation in his specific fields of interest, and not those of his students. Many of the problems con- fronted by less deve10ped countries do not fall neatly into . c Q. . .g‘. .u ' .‘vdvul. .- - U - O-ut‘l «v 3;...z...:, c'... an ....: '.:'_ - . -:. I-.. I‘.. u 'D 9:“ pl- ‘ '. “' "" M'- .u . ‘ ‘ v "' “u~vo--. . . .. . lb .w‘;‘ ._ kg «0...; .~ ~ ‘I' . n. ‘0... A I g u I- 9 ‘ an ..-h.. a... C e:...:;:: {5391 b..‘. '~ A I. - a ‘m...'). 'V ”:'::;~_‘ ion 5‘ u. - ‘ ‘ Q: ‘L"; -,_';~ U“..'~-‘ A .. .. ‘ . ‘.". ‘h~‘ I .v. y... ‘ ‘ u.‘~ \ Q I\-. . U. "'o:.~- :.'.‘~ ‘. ‘b.“ . ‘\.~ . a. ‘ ’ . q “A i \. ‘.‘ ‘ 0 . ~- .‘\‘-: z‘ x:.. ..' h v .— ““I u. ‘ ..s:, _.g .— ‘. -.~ ‘ C‘e ‘ .. , '~."“ ‘ q ~ K‘. v~.‘ ““ . II, . x‘ \. 'M._-v (‘ - ‘ d “ . \;" ‘.““§. h.. . ‘ h ‘ I ‘= I" \. . ' A \ -. \ “: ‘n ‘ ‘V ‘ s... f‘._ U .. “ A a- \_ §“ IL"~ ‘.'£ I «..‘~. . 5‘ F r a” ‘ 'u ‘ u .‘i ‘ ‘ ‘2“. . ‘ .‘u \n. .—.-_ .» . .0— 12 traditional disciplines as defined by current university departments, and may depend on an interdisciplinary effort that means various departments working together, which in turn may be interpreted by some faculty members as giving up one department's independence to another. The pressing problems to be solved in the process of deve10pment are all too often only slightly touched upon by the U.S. graduate education received by foreign students from less developed countries. Haussamen (1965) expressed the wants and needs of less deve10ped countries when they send students to the U.S. by saying that they need teaching that illuminates their own ancestral struggles, programs oriented towards their eco- nomic and political problems, in short education that launches students into the mainstream of their own nation's future, and not of the United States. The Meaning of Deve10pment A distinction should be made between the terms economic growth and economic development. Schiavo-Campo and Singer (1970) indicated that a relevant basis for distinction is that, while the term "economic growth" applies to income increases within the existing social and economic framework, the term "economic development" includes the notion of structural change on the economic or on the social level or both. Economic growth has come to be , n . . wI-v'O'il nu..- , .‘ n~.050.v. .- o a .t.;. .F '. :':-‘~b‘ y'v an. - . ' I "‘ 0A: ‘v-.,. ‘ I- "v.¢-bi .¢ you . in .‘.‘ a, ‘ . ‘ """Dcv... vs. . - I . QR. § ' -N ‘ Hun. fiwu a» a .u: u..‘_ ‘ n. ‘. .,. .- ‘:.'~.b“ '. ..- "“v-._ " “-\D ‘¢¢_.‘ ‘- ‘. s '- c. -. h‘ - ‘ . u ‘- ‘t -. ‘..~~ .n' .H.‘ ‘u..'. ‘w I -fl ‘ ‘~.'-~ h. :2“ ‘ o“~‘ . ‘4 ‘-: ‘ 6.. c. ' '~_‘.l a v...c A... _ ‘.\‘ “. "u ‘—‘I.‘ ‘ ‘.‘. .‘~‘ .‘- x. ‘. .'. .. ,. ‘-"‘\ u .‘s ‘ ‘.~ ‘ ‘. k g.» b. .1 .. - . \‘1: s- l ‘. . “'0‘ . {2v- , .‘.‘\ ._‘ ‘ a; . ‘ “ \ >._ ~‘s ~§ ‘ "y 1 s‘. .I- \~ “ . g ‘ ‘0. .\ «‘Q‘ . ‘\\ \ ~~ . I ‘1 a V .-_ I“\. s’ Q -~ ‘-"‘u- ‘\¢'- x K \‘ u. ‘ b \~‘: - ~ “ .. “~A‘V--I ‘ v \ O \‘A‘ “'. g\ .v. .\ «:8-‘ 9-. \ . '. \ .‘ \. \‘ ‘, ‘Q R. ‘-~§ " v. ,4; ‘ O .\ “ ‘ “ ‘ ’i V - 9H ‘. ¥ 13 identified with the process of income increases in the more developed countries, while economic development is a term associated with economic progress in the poorer countries. Deve10pment means more than a quantitative increase in production. An increase in production would in fact be more a consequence of deve10pment than its essence; UNESCO (1969) expressed that development is more than growth. The real problem of development is not to increase production but to increase the capacity to produce. This capacity ultimately is inherent in people. It depends on people with the outlook, knowledge, training, and equipment to solve the problems posed by their own environment, and thus, control their environment rather than be controlled by it. It was mentioned by Chenery (1969) that there is no agreed definition for develOpment, and that the rate of economic growth depends in part on the success with which changes in the economic structure are carried out. Never- theless, most writers accept that the concept of economic develOpment encompasses the changes in the economic and social structure that are related to rising income, but they make the distinction that theories of development try to explain these causal relationships, while theories of growth are more narrowly focused on the sources of increased output. Economic literature identified development with average rates of increase in real output per capita. Dorner (1971) indicated that little research has focused on inter- relations between productivity increases and other indicators - ~I-Q.. .. . '-t...' .. 5".- - 0 ‘Q on. ‘ ~.--| 5. .' —. ' in. a... . I ' " Z3 -. " 'Usguv. I ‘ u» .‘.._‘H .. . -‘ “.uo.“.‘ Au-..‘ - i‘: ‘9 0 _‘fl ‘ I. h_~__ . l”. " I‘- --vv: ‘ .... .. _: ..‘- i’l‘; ...:. ~v ._.... ‘ .- I O - .;'a ‘ a.._.. . ‘ I '5 .. -., -‘ > I .... _ .I _ ' .‘ . _ .. I _~ pr." 1 ._._ .‘. O .,_A . Q ..... 1“... “ s.- 5. :.'~- . 1 Q n- -‘on .. -.. 5. . o l ... 'V - ‘ " "“c. \ -.- 4|. ._H - u -e. “.‘ “ a, “. c. , ‘. _ . I‘. :41. ‘ ~_‘-. « H ..‘ I.- “ct: ~“-“‘ i.-..~. “ ‘ h h ‘1‘- ' u“.." o I ‘ I i -_ - U‘Q‘C. . t .. . ..I .. . ‘s -- . h- ‘ “\‘- :- I V‘. - ‘ b N :‘u. “‘,>.h. . -‘ “.~ . . . \‘ :5 5‘ r . ‘l - 5. u.‘ N \- ‘ I \ -‘ ‘ ' ‘ ‘s -~“ ‘-:. o .. 'u . .. :. ‘ ~ ‘ ‘ ~:; \~ “ a. .Q . . I ‘ A ~‘ ‘. ‘ P ho ‘.\ .. '\"‘ . .. n. ‘ I "r. ¥‘ ‘ ‘ n 14 of development such as the reduction of mass poverty, unemployment, and inequality. Lack of data on poverty, unemployment, and inequal- ity reflects the priorities of statistical offices rather than difficulties of data collection. The conceptual prob- lems of these measures, in Seers' (1969) opinion, do not seem to be more formidable than those of the national income. We have just grown accustomed to ignoring them. There is agreement among Dorner (1971), Seers (1969), and Parsons (1969) in considering development in the broad sense of expanding Opportunities and the human capacities needed to exploit them, along with a general reduction of mass poverty, unemployment, and inequality. We are going to draw on the concepts expressed by Seers (1969) in explaining the meaning of development: we have all been aware that development consists of much else besides economic growth. Nevertheless, we are still setting targets mainly, or only, for the national income. While it is very slipshod for us to confuse development with economic development, and economic develoPment with economic growth, it is nevertheless very understandable. We can, after all, fall back on the supposition that increases in national in- come, if they are faster than the population growth, sooner or later lead to the solution of social and political prob— lems. But the experience of the past decade makes this belief look rather naive. It looks as if economic growth w '9' -:-- “an. ‘0'“-- uu' nub I n . ‘ ‘ O..- »-I. - i‘. ...-vo.-o~u' _ ”A. a 6... _ l. . ‘ s - v y“ _ ......u. ."v.. .. . -.. ‘ . a ' \u ‘ \ " -. i i U. o ‘ v ”oeny. .v‘ a. _ u " ‘0‘ A... ”_ .5. ‘ "‘v- . ’ e “ '0 ’. - n-~| ‘. _‘ -~‘ § ._. W' h . NC.." :u. In. “an . ‘6‘ ‘ ‘A Q \ " .~ 5 n ‘g--‘ “ Q.‘ ‘ “\~ I a -. ‘h. ‘R‘Ql "v.’ ‘ . o :‘U~ > ‘ ‘O s H . ~. “« V I ‘ “‘ “ ‘I- ‘ ~ H n..: a- .0 n -‘n‘ . h «I ~ I“ ' 'K‘ s - ‘. .I. C ‘ ~ \ -l‘ 5 NH: - s.“ o" s '1‘ ‘u‘. I": p: ’ n- u \ .‘ ‘ . ‘I ‘n . 1'" .' I d .. x. 5 -\ s “it; ‘ I ‘.- ~5. 6‘ 5“ ~ ‘Q . in. . "~oi. “ 15 growth may not merely fail to solve social and political difficulties; certain types of growth can actually cause them. Now that the complexity of development problems is kmcoming increasingly obvious, this continued addiction to the use of a single aggregative yardstick, looks like a gneference for avoiding the real problems of development. The national income is not totally meaningless just Immause it is not an indicator of develOpment. It has some :fignificance as a measure of development potential. To nflease the developmental potential of a high rate of eco— mmflc growth depends therefore on the policy being followed. Acmuntry may have little or no economic growth but be busy :nmhaping its political institutions so that when economic qumth comes, it can be turned into development; such a mnmtry probably has a greater develOpmental potential than Omewith fast growth where political power remains very ftmuy in the hands of a rich minority. Development can be defined if the question is made: Vmat are the necessary conditions for the realization of the MRential of human personality? 1. An absolute necessity for this is enough food. Since to be able to buy food is a matter of income, the criterion can be expressed in terms of income levels. 4-...-. .9...“ ._.. _...._. 16 Another basic necessity is a job. To be chron- ically dependent on another person's productive capacity is incompatible with self-respect. If per capita incomes are falling, absolute poverty can hardly be reduced much, nor can unemployment. But a rise in per capita income can be accompanied by, and even cause, growing unemployment. The direct link between per capita income and the numbers living in poverty is income distribution. Equality, which should be considered an objective in its own right, is the third element in develop- ment. Inequalities are objectionable by any reli- gious or ethical standards. Poverty will be eliminated much more rapidly if any given rate of economic growth is accompanied by a declining con- centration of income. The questions to ask about a country's development are: - What has been happening to poverty? - What has been happening to unemployment? - What has been happening to inequality? If all three of these have declined from high levels, then this has been a period of development for the country cmncerned. If one or two of these central problems have been growing worse, especially if all three have, it would be strange to call the result "develOpment" even if per capita income doubled. A "plan" which conveys no targets ’ ‘h‘h—_‘- .’ -“ 17 for reducing poverty, unemployment, and inequality can hardly be considered a "development plan." Of course, the fulfillment of human potential requires much that cannot be specified in purely economic terms. They include adequate educational levels, freedom of speech, citizenship of a nation that is truly indepen- dent, both economically and politically, in the sense that the views of other governments do not largely predetermine his own government's decisions. As undernourishment, unemployment, and inequality dwindle, these educational and political aims become in- cxeasingly important objectives of development. The essence of a state of develOpment, to Currie (1967), is not merely a question of keeping alive under any cxmditions. It is, rather, the possession of widely dif- hmed and rising cultural, educational and economic levels, (asense of improvement and betterment, and a widespread (xmviction in the justice and efficiency of the economic mmlpolitical systems under which the individual is living-- hishort, a sense of dominance or purposeful control over cme's environment. A rapid growth in population in under- Chveloped areas today prevents less developed countries from utilizing technology to achieve an assured dominance or control over their social, economic, cultural, or polit- ical environment. Now it is being proposed to devote more of the poor country's scanty savings to the growing of more . . I 'V "9- .7. .u' ‘;’:-"-’:I. cr- u‘r-v-uga. u 3.. O . ;.. .. M. .— .: .... H. ~~.. ‘. '-' .3... .,, ~--... ‘ I ...- “ A- - .F.” \h' MN. ..“ t.-. - . *v‘. I “v v. 5‘13». g ;:0.-.”“:. A .uc.—-~ ' "0....- ". -... ("'u' ~‘ .5~_. .- Q ':-‘ “ I, “~-‘ .- . s . x . O . ‘ .- ..-.: 3...; 5“- I. .G- I ~ ‘ . - I :v.‘.‘5 p ‘3‘. g“ 'v ; .H “ v‘ "-.‘~-¢“ ‘Q! a n‘ _ I .‘ .l. u.» ‘: u.~v, ."».O ’. .‘ ‘3 ‘ . a s .- _..‘ 2'.“ . . ”‘3: :*‘~A “he I“: o ".' .‘ ‘ .."“A. . . «uh, :- x. .. ‘ \ ‘ ‘_ ‘- q ‘0 . "W'- ‘\: :-‘ ~"e "F 'v at" _ i‘ ‘. fi‘. . I.- s . . “\ 3". ‘I. I.‘ ‘ u‘ ' H ‘u .\'\_~ . .‘-;Eo ‘ ‘s “a. by.‘ ‘\ . .‘ a O ~. ‘ ‘ 9 ‘ e Q ~ .y I 2"- 18 agricultural goods for domestic consumption. But true development should correspond with a smaller prOportion of our expenses being devoted to agriculture. Growing more food is not the solution to underdevelOpment; it is a painful and regrettable necessity, forced on us by the rapid growth in population and the failure to achieve development in the true sense of the term. High birth rates are more a result of poverty than of lack of birth control knowledge or the attitude of the Catholic Church, the reason being mass poverty resulting from mass unemployment. Rapid population growth creates new needs but not effective demand. To add to a number of very poor country people creates little additional buying power. A station- any population does not mean a stationary effective demand. mithe contrary, as a general rule, the more slowly a pOpu- hndon is increasing, the more rapid is the growth in income per capita and gross income, and hence, buying power in amolute terms. On the other hand, the extraordinarily high pucportion of children in the population will add nothing to subduction, and will impose a drag on savings. §§~It is generally thought that the size of the family is the sole concern of the individual parents. But the interest of the community and the state should be imposed on the individual. If we collectively want to exercise purposeful control of our environment, the unrestrained growth in population should be prevented. Currie (1967) \ . . ‘ u... “.5. “\‘v , .: :.~-»v 5‘s a. . ' Q '0 ‘5‘. "A Iv . V n no» ‘ a ~e.¢u ‘ 1 ....9. “PP“. . I ““‘"4- I¥¢.J. n... ._ v. a I h- ._ u-.. ..'.‘. .I . ' n- ~ ~ ' -ll -. h..: -. -\F.‘ \. v‘ _ O -. "fi‘o- .1-.- \ k... ‘P‘ Q..- V ‘1 A- v _ Q ~ " . _>-_ x...“ . .\ ~\_. -. _.- § P ‘ 6 ‘0. v - ._~.‘ . Q ~ .;i .,_ '\ . O. h S‘-‘ ‘ \ I ~.. 0 -.' u ‘. 5‘:. ‘ V.. ‘ ' ' ‘s c "Q ~- Q .I ‘ .1 ‘Q .‘ ‘ ,. .‘ '- . ‘ . 's‘bo" “o, C . '\ .u"P~ ..‘ ‘ A : h i -\ ‘.:_ -; ~ " r- ' ~ ‘ '~. .‘ c ‘ Q‘ '0- s " ‘ N‘. ,._.‘ ., v . (c ‘a- " v- .‘V‘ ‘. ‘h- ‘ “3‘ .. U a “P ‘ \ “. I,» -‘_ ‘c \“v-.' '- s.‘ “ ’- ‘v; '~ 0 -. in ‘- ..~H‘ ‘\ - ~ '9 H‘. ‘5 - I ‘- . . . \ ‘. G :- ~‘ ~ .. u‘ ‘- ' ~._u ‘. r. ._ ‘ ey. is. ‘.~“ \" y - “’5- “~ ~ ‘1' l9 regards the rate of growth in the population of the under- developed countries as the single most important obstacle to development and hence the single most important problem of the world. Restraint of pOpulation may not be the suf- ficient condition for development, but it is an essential condition. He hOpes that official national development plans will include in their objectives a marked reduction in the rate of population growth. Looking for insights into the nature and require- ments of public policies for the mitigation of poverty, Parsons (1969) expressed that those policies need to have upre comprehensive terms of reference than Optimum resource afllocation supplemented by maintenance of a high level of employment opportunities. The policies need also be formu- 1ated*with systematic reference to generalized conceptions cm rightful participation in the political, economic, and social order. In a free society, a citizen's failure to overcome the natural drag towards poverty could be due to alack of objective opportunities. It was also recognized by Dorner (1969) that devel- cpment is more than capital, investment, and markets. It is also a complicated process of institutional change, redistribution of political power, human deve10pment, and a concernted, deliberate effort in public policy for redis- tributing the gains and losses inherent in economic progress. Although high levels of employment and aggregate demand are a key to any solution to urban and rural poverty, ”:2"' :bopnv- H H-"-. Iuvv-u v - ' 1 "WR‘ RVA... ‘ nouvv b.-.. I egg-’...'. . ' ""-u‘-ofi . O. . . L"- ~p- ~ q g ‘F e "oouy- .‘. \"" ‘0‘- - .“O.‘| ..._ .- a ‘3 -:.“F-q . “.1.‘ "\ .“~‘ ‘ o .. , . - ' 69. .H s a . ‘Vu-a I o ‘- _ :"'VQ ‘N.i= u I a . U“ ._i ‘ ~ “-' a'a ~ ‘c... H .. h. u. . - - c... '(‘~.‘. 5 ‘ ~ u .D‘ . u I 'y ‘3'.“ ‘ ' v, I VI- 6 . ~ a “. ‘ K ‘t ‘o = .. \‘N _ ~ " \ n‘:‘ . . k F s...‘ "' ‘ u U~ ‘ 20 greater attention must begiven to those tough questions of income distribution, the structure of economic power and opportunity, and a redress of the inequalities that accumulate in the course of economic development. Schiavo-Campo and Singer (1970) referring to the main features that a simplified model of economic and social growth should have to be relevant to the developing coun- tries of today, stated: "if we accept the basic thesis that the problem of the underdevelOped countries is not just growth, but development. Development is growth plus (mange; change, in turn, is social and cultural as well as mxmomic, and qualitative as well as quantitative." The key target must be the improvement in the qual- ity of people's lives. This is a notion that combines both qnmth and change. Improvements in the quality of life are attme same time consumption and investment, objective and :hmtruments, demand for resources and supply of resources. Health measures are the instrument for improving the quality Oflife, but better health is also a desired result itself, amiin turn a source of increased productivity which pro- dees the necessary resources for further health expendi- hnes. Better food is the instrument but better nutrition is also the objective. Better education and training are the instruments of change but the better educated man is (alend in himself. Better housing is the instrument but it is also the objective. The same is true of social security, ‘ “0-9 u‘-vfl";~c . M“ leu- .4 I. t . ‘o-u- ~=¢ on“ onufivfl- “"‘~O'Ivfi '* '- it ‘u 5"- . u ,N “ 1‘. ""Dn. . . I... bv. h . ;-.._ . - . O-I.‘.' ‘~ ‘ . r. --_., . ".~“~-.‘. . I O on ‘e _‘ ‘ ... n.-. Q . n'. ‘ 6. . -_: “..~A‘ 9.‘F a ..'hv p u ( .. .. .. w‘ h V‘..‘ . ‘. q.‘ . ‘fl . n 1.. ‘ - t A " V'N. o \n‘ ‘ _ -.. ‘~ .‘ «.H N- ‘~ ~ ‘ .V . \ .- \ . .. .. ‘.’ ‘5‘ ‘ ~ ‘£"C ‘\ . 's. . \ “': . ‘ h s ‘ ‘ a“ A '- & s ‘ ‘u A. -‘ ‘.‘ s . \ ' ‘ . ‘3. ,. ‘ 21 of improvements in rural living conditions and of other social indicators. This raising of the level of people's lives is both the objective of development and its instrument. Improve- ments in people's level of life can be achieved both directly or indirectly via income increases. Thus, the model must include provision for measurement of improvements in the quality of the level of living, according to its main relevant components, whether they are labeled economic or social. It must incorporate the four types of relevant development. 1. The direct improvement of levels of living 2. Translating the improvement in the levels of living into economic growth 3. Using economic growth to improve the levels of living 4. Growth alone, the predominant concern of economists. The conventionality and arbitrariness of the dis- tinction between "developing" and "deve10ped" countries has aiparallel in the arbitrariness and inadequacy of the crite- rion for measuring economic development. The traditional cmiterion is per capita income, that is, the aggregate value of the flow of national production divided by the population cf the country. Schiavo-Campo and Singer (1970), in consid- ering the problems in the terms "aggregate" and "value," indicated it was easy to realize the imperfections of per .n-yq I. «9.. I I n . 0" u-..‘ on twin» . l'. ‘ ,_ :OOA--. . .. ~ — “ 0-.-.... u- .‘ . u 9 2",: a. _~.r v no. " :Vv“ n, .:- .z- ht”; -; ..._ V.~ V‘ I“- _ -“o- .. -.....: a. “N 'II‘ . v. .." -’ 'V- -. (I (I ‘5 §. 1’ (I) l ' p \ \‘c ~ ~. ‘ 22 capita income as an indicator of economic development. The conceptual, methodological, and statistical difficulties are very considerable particularly if international comparisons are attempted. Among the various possible aggregate indi- cators of economic development, per capita income remains the least inadequate one. Distribution theory concerns itself with tracing out the effects of various policies in distributing economic tenefits among persons who own or otherwise command control cwer resources. So, distribution of-ownership or other control resources among people is given. Long (1952) expressed that in terms of the dynamics of economic devel— cpment, the real problem of distribution is: How does cmnership or other control over resources come to be dis- tributed in the manner it is? The question is not whether a landlord and a tenant each receives the appropriate return for the resources he controls, but rather, is it appropriate from the standpoint of the economic development of the coun- try in question, for the landlord and the tenant to have these particular proportions of the nation's resources under his control. In analyzing capitalism, underdevelopment, and the future of the poor countries, Weisskopf (1971) argues that capitalism in the poor countries of the modern world is likely to perpetuate underdevelopment in several important respects. First, the increasing integration of the world «man on. an.-. . u \ \ t. not“... ‘1‘» a . . .IH .- o-«uov‘c' u...“ . "05- V . v ~- " nu cow-0 . “"I-.v‘ .. u‘ "‘"v-.-~ -o-...'. \ “'“ . hi N...“ .--»\a - 4 O .. 'v ‘ ‘ - .I C. .' fl ... I “‘ 5... cu. _‘-' ~ A . I.-. b-“‘ ‘ o. 7’ -.‘~ .. .~ Q -. .-"» u. . Vo’._. - u‘ _ . -.._=' .; e.. ‘O N v.‘. m, u.‘ v-n. ..'~ - ‘n uy ‘A’ v.‘ ~.~. _ \‘ -.‘. n . . a\ Q ~ 9 “.5 .- .~ -. ‘4- ~-.- ' ._— A c ‘3'. Q ‘ .‘. .. \ . 1“ \. §_': 5...” ’0. ‘ v Q s-- V “-3 .- -- ._:‘ _. 5 I ‘1 ;. .‘.‘~ ‘.~. .. s‘ A, I. 'Q‘ i. ‘. ‘.‘ ~ Q. ‘ . . o.’ ‘,. t _ a N‘ h- ‘2 ‘h . \ O: -‘ \.V . I - .‘..: IA “~A"“ . a g“ ‘. \ l. c u ‘\ \.-\.‘ ‘ $ ‘ F 5' a: N 3‘ 'a‘.§ .“~ ‘2‘. ‘I CF ‘ \ ¥ '\ '.. . . .‘ “ ‘.‘s‘. a ‘: s h‘ ‘ F. . fl “. as \ ‘9 ’ ‘- d C ‘- 23 capitalist system will tend to heighten the economic, political, and cultural subordination of the poor countries to the rich. Second, capitalist institutions within the poor countries will tend to aggravate rather than to diminish inequalities in the distribution of income and power. And third, capitalisnlwill be unable to promote in most poor countries a long-run rate of economic growth suf— ficiently rapid to provide benefits to the whole population or to reduce the income gap between the poor and the rich countries. The likely failure of capitalism in the poor countries points to the necessity of radical social change in order to construct a decent world society and to achieve a just basis for world peace. These negative consequences of capitalism for the poor people of the world will create the basis for revolutionary movements aiming to achieve these goals. It is terribly important to minimize both the time and the violence associated with the necessary and ultimately inevitable changes in the poor countries. What can progressive elements within the rich capitalist countries, and intellectuals in particular, do to help the cause? They must, on the one hand, work to destroy the myth of gradual improvement in the poor coun- tries under the existing world capitalist system. It is important to show convincingly that radical change is necessary for true development, in order to counter the ideological rationalizations used to support the present system. On the other hand, they can increase the pressure . .. no.- 't- OF~ tout: cflooufl ’ .... “H“; v‘ .... as an -o . (I; (H . . _ c- - . ." 'b‘wv so u...‘.\ _ a ' . -o:.; I... ’;" ‘0‘. can -., - Q l 9 UK: 5 O a *5: .. .-.\A'. -" 'O Inns.-. - ‘ . 7'~: .,.. I‘- f~.““'b Vb... ‘: Op. ‘QH- .__' F i- . W an V‘. _' ‘ ._' on,“ . ‘n. _ "‘ \. .-.‘.‘ ‘ln . L "v-..._~ “ - ~--- 0... a- U a- ‘ n v ._ ... ‘.~ . -- ~ ~ .~.. ”kg“ . "h '- ug. . -.,..:. ‘I ~‘— 0““..- U-.. s a s v. n A 24 on the ruling elites to reduce their involvement in the poor countries, to cease to oppose revolution with economic and military force, and to show willingness to recognize the trade with revolutionary governments. Such policies, of course, run counter to the inter- ests of important groups among the elites in the rich capitalist countries. It would be frivolous to expect these groups to accede to such changes without powerful struggle, even though in the long-run they appear doomed to failure. The crucial question that remains is whether this struggle can be won peacefully-~through mounting popular pressure on the intransigent elements of the ruling elites--or whether it will entail a violent confrontation within the rich capitalist countries themselves. Development Economics The vast literature on economic development has not yet produced a unified, generally applicable, and operation- ally useful theory of development. Schiavo-Campo and Singer (1970) indicated that perhaps no such unified theory is possible or even desirable. Theoretical writings in the field of economic growth can be joined in a common framework more easily than writings on economic deve10pment, since growth takes place on the basis of an unchanged social and economic structure. Income changes can be analyzed with greater certainty owing to the solidity of the underlying . .0- luv-‘9‘" . . D "J ”nut-“b, .n. 'U‘ :Q‘q‘-Q Q —-' -vvnsvn»‘~ c-::...I,.p ‘5 . - ocuvgvct 5. . . I" "": A-.. .- -..--...‘. ““. .-... . Q ~ -\ .‘A ‘6 u. A n... «0' fl. has o :‘;p: ‘::.‘A“.. \“‘o.“ c b. ~..~ - I (I .C-‘ z... 4' a...“ ..“ “H ""v. ‘ ‘I -‘I -: ‘v- -. .quV‘. “: A A—-_" v-.__ ..- - b.u-u. ‘: R. ._‘ -. c... ‘1 vhf” ”O 0-. fi._ '- - ‘Va- -.~ '§-:;:: ~~~ .. “..‘ ._ . "~ . §., ‘5‘ . c ._‘- . b. " ‘- ~ ‘ ~ h‘Vv ‘~'..-‘e.‘ - n . W. , .‘l - \‘Q C-‘ ‘h -_\-.~. ~ A 5. \..‘_ My F- .. “s*\ ~\ ‘0‘ ‘ ‘u “ “ Q“‘ ‘x .5; [)1 25 structure; the ceteris paribus assumption is a legitimate one. Economic development, however, means structural change in addition to income increases; the rate and direction of structural change is perforce different in different coun- tries and at different historical times. Valid and useful generalizations on development phenomena are thus difficult to find and do not easily fit into a unified and consistent theoretical framework. Commenting on the scope of the field of development economics, Chenery (1967) indicated that its central concern was the process by which economies evolve and increase their productivity. He made three groups of the problems that have received major attention in the study of economic development: 1. Sources of growth: the relation of increased output to increases in factor inputs (capital, labor, natural resources), technological advance, and institutional change. 2. Structural change: shifts in the composition of output, international trade and resource allocation that typically occur in the process of development, and the nature of the causal relations among them. 3. Effects of rising income levels on the composition of demand, the location of economic activity, the distribution of income, the rate of population increase, etc. p 0 ....q. A. _ t—-~o' b. a“ O . on... o . . I I ‘.~" 4 -....-ou..u u t . . .o..,._ ‘ . _ D p ' ll) ‘ul... . ‘ . . I . . . . . ‘---. I. To ~. . __ w L. I I ‘~ . \‘ufib- .‘ o \v z ‘ \ ‘, A. ..-~- \ .. \ ‘5 26 A.theory of development must encompass all three of these interrelated aspects to some extent and they cannot be treated in isolation. There is little reason to believe that the concepts and hypotheses derived from the U.S.A. theories of the firm, of markets, of pricing, and of equilibrium, are entirely relevant to problems facing the poor, agricultural countries, indicated Dorner (1971). These theories could be developed and perfected only within a particular political and insti- tutional context. They provide no analytical insight into a systeulwhose institutions are different. The need is to understand institutional systems and the nature of public policy issues. The same author also is of the Opinion that empha- sizing the need for research on policy issues does not mean that the goals of policy are set by politicians, bureaucrats, or pressure groups and that the role of research is merely to seek the most efficient means of arriving at such pre- determined goals. Rather, it means that the investigator must be concerned with both ends and means. Seers (1969) is of the opinion that since development is far from being achieved at present, the need is not, as is generally assumed, to accelerate economic growth--which could even be dangerous--but to change the nature of the development process. "‘ru ' v- dv..-. --- -n—... .. -- .- ~’...n.-.t.._‘- . a "'-‘ ‘0 no -. ,. -u..~.. s . L . 27 Dorner (1971) mentioned that certain strategic émvelopmental questions are not being addressed, like: cmeation of productive employment for the growing rural labor force, creation of opportunities for the development cfi'human abilities and capacities, and ownership distribu- tion of land and other resources. An agricultural economist, iming a farm management approach, may ignore the displace- nent of workers or their need to find viable opportunities 2? . ‘s \. \ \' ~. I \':\ I- - ' A». ”‘5 V 9 Q :‘ . I. a ! .1 ‘ ‘~~-" ‘. l‘. '- h.‘ " § ‘1 ‘. H. u ‘ K -,; v I Q‘.“ ‘, . by | N O ‘t K. I‘. . ~ ‘:"! . a. e_: \ 4‘ Fz.‘ O.‘~ H‘ I1 ‘ .. .z“ . . s A ~ \~~-‘ . .‘ F" U' I ‘ Lu '.' § \“. ‘5 ‘0‘ a . . a a. m j 29 The automatic transfer of institutional tools and standard-of—living patterns prevailing in industrialized cmuntries to the poorer countries, disregarding the dif- ikrent social and cultural conditions of the latter, may 1mm.only disrupt social and cultural cohesion,but also {move self-deafeating in terms of economic development itself. Third: Economic development is a dynamic process; ébvelOpment implies structural change, which calls for a rmflification of conditions of production. Economic concepts IEmd to be reinterpreted in a dynamic sense, and policies Immt be based on projected future conditions of production mmlof demand. An economic development strategy for a less mnmloped country should be based not on current comparative mhmntages, but on estimates of future possible dynamic mmparative advantages. A comparative advantage in a inmcific sector can be created by a very conscious policy decision. Dorner (1971) takes the position that as major (manges occur in society, the existing body of theory, ckve10ped through the study and eventual resolution of nmjor policy issues, becomes inadequate and fails to comr guehend the new policy issues that confront society. Without direct attention to relationships not prescribed by present theories, some of the most pressing public policy questions are ignored. 30 The techniques of economic analysis have evolved from the study of mature industrial societies; Chenery (1967) indicated they include: (a) deductive reasoning fumIpurely theoretical models, (b) quantitative analysis hleither descriptive or econometric form, and (c) histor- ical analysis. Research on economic development attempts Unapply these techniques to a broad range of societies at <fifferent levels of development for which alternative basic assumptions may be more apprOpriate; it has also led to more systematic use of comparative analysis to reveal similar- ities and differences in economic structure and deve10pment Inneesses. The character of development research and its amxmplishments may be illustrated by four major types of Nady: (1) analysis of deve10pment models, (2) country studies, (3) inter-country comparisons, and (4) deve10pment planning. Eeoretical Analysis of Economic Evelopment The theoretical analysis of economic development Miempts to show the interrelationship of changes in differ- ent economic magnitudes over time. For the underdeveloped comntries, the main purpose of deductive analysis has been to discover various processes by which a primitive economy can start deve10ping and to determine possible causes of changes in the economic structure. The nature of these studies was illustrated by Chenery (1967) by describing three types of theory which utilize different approaches. -- ~n. nan.- ' \ ab 0...." y... Insan- -: :. on no." u M: . . a .' .J .’-.","O‘ c., .."“\- o. I . :2” . '0‘.“ ‘- .HA ' “ GA. . H .._ "v .: n...- '-.. 't— NA. ‘IC by. .... lb t n: fl] s. -_ I. ‘ ; ‘-. -"'b. ‘u N».‘ c‘\ b s \. . 5].. . v ‘h a \ -‘ ‘\‘ ‘5 K “'0‘ \— .“~._ - \ .~‘ \ . . D ‘ . H .\ .~. "‘n“‘ I‘- ‘ ‘n ( ‘:_- y \ ‘4 ‘1 : A I s . ~ b ‘ ‘ \ — ‘s‘ .- h ‘ ..~ , N \_ “- “A . h“ ‘ .¢ ‘C ‘n. \,_C'. s l. . \:.-‘ K ‘g V I- .. \ h ‘t "s \f'“ 9 “ . \V.‘ k I \~)“‘ \‘: n \ \. wk. _ ‘ \ .... .‘~~- .. .‘ ‘t':~ ‘ I 31 Dual economy theories.--The deve10pment model is based on a breakdown of the economy into a modern or cap- italist sector and a backward or subsistence sector. The gnocess of development was characterized by Lewis by the expansion of the capitalist sector, a consequent increase hISavings and investment, and a transfer of labor out of Ioijroductivity rural activities to more productive occu- pation in the modern sector. A number of empirical studies have been conducted for individual countries. The unlimited supplies of labor argument of Lewis U354) has considerable validity even if some of its rather restrictive assumptions (large population growth induced by mxmomic deve10pment, near zero marginal productivity in the quicultural sector, ease of training skilled workers) are Imlated. Thus, it is not necessary that marginal productiv- ity in agriculture be negligible for development through Surplus-labor absorption; it is sufficient for it to be hmer than the wage rate in industry. The existence of a Imrceptible wage differential may be enough to induce occu- rational labor mobility to the point where labor supplies can, for all practical purposes, be considered "unlimited." ENen though industrial development may proceed at a faster rate than the rate of population growth, labor surplus absorption can still take place for a long time if the industrial sector is small to begin with. Finally, it is not necessary that training costs be high; it is enough . nu thv H - I u Ht -II ucv A ' . ,q.' no a. .‘b0 5. ~\. no: U... ‘ ‘|‘ ~ ‘yv-‘b'. . . ‘\ o l v' (I) I '0 q 'u .u. ‘~ I‘O‘.‘- a; h "I “6‘ ¢ 5 \ V ~ ‘. ‘ . s. \.: «.f‘r‘ 32 that they be constant through time and in relation to the number of skilled workers needed. Lewis's major contribution may be seen in having analyzed the implications of differences between marginal productivity and wage rates, and thus in having pointed out the need for evaluating investment decisions on the basis of "shadow" (scarcity) prices rather than market prices. Schiavo-Campo and Singer (1970) commented that this theory can be faulted on several grounds. First, the view that large amounts of unskilled labor can be transferred out of agriculture with no reflection on agricultural productivity and to the extent necessary to remove labor from our list of operative bottlenecks seems too optimistic and unwar- ranted. Second, developing countries are not in a position to develop their own technology, but must adopt and adapt technologies deve10ped in, and for, the industrialized countries. Thus, development is associated with techno- logical progress. Technological progress can be expected to consist of increases in the capital/unskilled labor ratio, and in the skilled labor/output ratio; and absolute training costs can be expected to increase both on account of the income increase itself and on account of the tech- nical change accompanying it. O ”'3'..-‘: ‘ : *"vo I.Uo6~ .- . . o .».A' “Van.- -I - 5-. nus. 6 5.5'.‘ a .- - 5. ~e :._ . . n “(U ‘ u... '-..l ’ - ‘ .~.. ‘ - ::: 'H- W... -** l n... . ‘. - ~ - ..ul ~_.:‘. I "-t: a. \.E (I) (I) 33 Balanced growth theories.--It was expressed by Chenery (1967) that the notion of balanced growth is based on an assumption that complementarity or relative fixed proportions is the predominant feature of the demand for final goods as well as for intermediate goods used for further processing. On these assumptions, an increase in total income will require that the output of each sector of the economy be increased in determinate proportions, modi— fied only by the possibilities of external trade. On the further assumption that trading possibilities are relatively limited, balanced growth theory implies that an increase in income can only be secured by channeling labor and capital in predetermined prOportions to different economic sectors. The failure of market mechanisms to perform this allocative function adequately provided an explanation of lack of growth, and the determination of the proper proportions becomes an essential element in development planning. This type of theory contrasts with the neo-classical model of general equilibrium, which assumes sufficient sub- stitutability among factors and products, and sufficient responsiveness in the economy to allocate resources accord- ing to their relative productivity. The practical value of the several versions of balanced growth theory are largely untested. Less-than-unlimited substitutability applies not only between different categories of inputs, between labor and capital, but also between different types and qualities q \n u . cod-i Ii. inn..- nu‘h ‘ O Q U. a ‘v u "1:“ ~: --- uov‘... ...--.. _ R A“ 0- \t-......‘ v.. ' o . -. . :"" up: .._I on ‘- ' n .‘n I. 0“... ~. M I. ~ 7!; -'. II. ‘ ". 4“: ‘ _ v - “‘5 .I. . . ‘.. ' ‘ ' As F ' ..."‘ s ‘g; r. K.“ .‘~“ . ‘ .._ ‘ w . .. ‘ “ .. a '2 z ‘ In 5“. ‘Q 1“ '- ‘7 5.. ,- h‘ “\ : =..-~. 5‘ ”u- \ s...‘ "I. '~. \ .‘ ~ ‘t. § ‘ ‘ ‘ .‘,. g . h.-‘\ ‘s s _‘ I In.“ ‘ . a 5“.“ .. b \'. y . a ‘a. ‘ ‘§ “,:‘ \. ~‘ .‘ A "~a . .s ""s. ~~ ‘.‘.:-‘u. \u v .‘V .' ‘.‘ '\‘_A‘ ‘ q '\ in“ “~‘ v. 0“ Q .\_ . .‘ I“ \ m ‘ N ‘u‘ F: 0 V‘ .. .~‘~ . "‘ z. . ‘ N \ H ~- \~\‘. .~ u“q .. ‘n s 34 of the "same“ input (Schiavo-Campo and Singer, 1970). Not only is labor not perfectly substitutable for capital, but, domestically produced machines are not perfectly substitut- able for imported machines, nor domestic raw materials or intermediate goods for imported raw materials and inter- mediates. An import constraint may also arise, therefore, depending on the pattern of growth of the country in ques- tion and its dependence on imports of embodied technology and of foreign resources. This is tantamount to stating the obvious proposition that economic deve10pment does not take place in an autarkic vacuum; that the domestic lack of a factor of production means little if the country can finance imports of that factor in therequired amounts; that in a relatively open economy, trade-off possibilities are just as relevant with respect to domestic versus foreign resource substitutability as they are with respect to input versus input substitutability; and that the external sector is a crucial dimension of the overall economic development picture. In discussing the need for foreign aid, Currie (1967) indicated that most aid is in the form of loans. Consequently, all underdeveloped non-Communist countries are going deeper in debt to the developed and are becoming increasingly dependent on this continuing process. The servicing of the existing debt now amounts to 30 percent of the new aid extended annually and this percentage may be expected to rise steadily. This means that a cessation of I - . A-II"~ .- ' Ch‘ - «y ou‘.. . . . V nus-‘1! urn .— mm—v‘ fitu‘ . ::: fizvv‘ :_ -.v-u y-...‘ ‘ Q! - I r- -; ;. , ‘0 .h.-‘ . ‘0‘- . w... . .. . A "V'h 7-! vy-.~.. C 7 u q '- - h. “ ;. ~ . ’\ \, v o. “‘5‘ U ‘ :. .C :‘u. - . . Q ‘4 l.‘ F; “". \v A H a . Q.‘ q a h ‘V :‘1 ‘1 \‘s‘. ‘. In ~.‘.;>= A u" 'C». ‘s . .‘A Q... ~ ‘. v““:“ F‘ ‘9, ‘L . M ‘t ‘1 ‘ ."Z;" A v" \ \ ~.\~“‘ N ha I . “= d\ ‘. “ '- I‘. \‘IN. "::A‘ ‘:~v ‘ 35 new loaning or even a slackening plunges the heavily indebted underdevelOped countries into grave exhcange difficulties. The alternatives are repudiation which, unless carried out with the consent of the lending countries and called "refinancing," means no more aid, or an accep- tance of whatever conditions that may be laid down by the lenders. The one avenue of escape a currently underdevel- oped country would have from extreme dependence on foreign powers would be to succeed in economic deve10pment, that is, to put itself in a position to control its own economic environment, but this possibility would be gravely weakened if the extension of aid is to be determined by political and foreign policy considerations rather than economic, and economists are to remain subordinates to diplomats. The main criticism of the aid program today should be directed at its lack of success in promoting viable economies whose development has become assured and self-generating. To attain success in development, Currie (1967) considers certain conditions as necessary, which, if imposed by international lending agencies could be resented or criticized on technical grounds. For instance, recipient countries will be expected "to do something about the birth rate." This presumably means dissemination of family plan- ning knowledge or the setting up of clinics for that purpose. This may or may not be efficacious. What we know to date suggests that a rise in the educational and economic levels is a necessary condition of a marked fall in birth rates. . A n. ' ' 9 'u n..1l. .ub ‘. a ..."V aeg- . _ ~ > ~ u"... “y'- a ‘9 .I« d! .. 25"»- 36 Merhav (1968) utilizes some of the insights of the balanced growth theorists as part of his Marxist view of deve10pment. He explicitly makes the connection between the small-market argument and the nature of modern tech- nology. One major characteristic of developing countries is their dependence on imported technology. This technology, elaborated in and for, deve10ped economies, is highly capital-intensive in nature, and characterized by signifi- cant economies of scale. Lacing the capacity for creating an indigenous technology, a deve10ping country will thus usually offer a market barely sufficient for one or two plants. The resulting oligopolistic structure of industrial production will constitute an ever—increasing obstacle to further development. Merhav's conclusion is that investment is necessary on a number of related projects, but it is only possible under a socialist organization of the economy and collective allocation of profits. To hope that the balanced growth prescription can take place in a capitalist economy does not make either political or economic sense, in view of the vested interest of the capitalist class in the preserva- tion of the existing socioeconomic structure. Disequilibrium theories.--It is assumed that struc- tural disequilibrium is the normal condition of underdevel- oped economies and that the price mechanism must be supple- mented by government intervention to bring about continued growth (Chenery, 1967). I”..- .00-- u- 9vflu‘ a .- DI! hoO~IIOU Q'qu- .IOI“ . g _ ._. ~~vav..b\.. -. In..- . _ .“ '6 Q ‘.~ *3- . ‘Qn- A . -' .. _V_o ."'-bou. . “c. n .- nu. A "‘ a- ll. ' 'u‘u‘ ‘I a... v. v“ 3.. , . . . .. on . ‘ 'I- - ‘v ‘ ‘5 Cu ...: a. at... " «A- .. .u by . . .._‘1 r- .u ‘ s. h ‘n- A ‘k. - S‘. ‘- '\_‘:q I "\ w c v I «u ¢ ‘ ZI' . \_. - \ - d‘ ‘ v: s A ~‘ ‘! Q n.‘- ‘. s V "\“V ”.‘N s \ "a- ‘:1 K\ . ~. ‘- -‘\ ‘ ~ u . 'I‘. .A‘ ~‘\ ‘2‘ \ FA Q ‘ =5 \- - - ~_ ~ .. . ‘ . can ¢, ‘ . h ‘i 37 This diagnosis is used to explain and prescribe for the chronic disequilibrium in the balance of payments that characterizes many underdeveloped countries. A similar set of assumptions leads to a focus on the shortage of entre- preneurs and decision making capacity as the key elements in accelerating growth rather than an overall shortage of capital or natural resources. Most planning models are based on some version of the disequilibrium system, which leads to what may be called a bottleneck theory of deve10p- ment in contrast to the classical focus on total resources and technological improvement. In analyzing the problem of structural imbalance and future development in Latin America, Chenery (1966) defined structural imbalance as the failure of a country to adapt its productive structure and trade pattern to the factors which conditions its future deve10pment. The factors to be considered are both external and internal. Among the former are the market conditiOns for its exports, the forms and amounts of external capital available to it, and the prospects for economic integration or other institutional changes in the future. Internal factors include the growth and location of pOpulation, the changing composition of domestic demand as income rises, and the amounts of domestic savings, both public and private, that can be achieved. When the structure of production and trade does not change in a way that is consistent with these limitations, -a n " an O‘av ll .1 :- -«..~I B~I‘-|h . ‘ an.-. .~ . .-o...--‘ *,‘ a ' p "a. no «a. . . (I) O ‘ 5" “' «no... ‘_ ‘ \ "' u.n.... "‘Iu '--.l. 0 a . .0. . _ . “ :1 -V~..‘. . c ._.. _. ’ Q :.. V': Q 0.. “‘. O- n A‘ ‘ "‘ s. N. . I ‘. _' ". ._ - :‘w ‘n. N- ' b. “ \. “v, .“ a . a ,‘.:: . ‘ ' :PA ‘9 5; s H‘ - ‘. “u .S ~ .H.:A ‘n' N», ,5 .l V‘l‘ .':-» ‘ ‘I f' F v. Q . I I . ~~», \ “ V A ..- I . . \~. ‘ 38 shortages--of imported goods, transport facilities or skilled manpower--are likely to occur in some parts of the economy and impede the deve10pment process as a whole. This form of structural disequilibrium results from defects in the mechanisms by which resources are allocated in a growing economy. In order to illustrate some of the characteristics of a growth pattern which is consistent with the principal structural limitations, the same author considered the effects of the changing composition of domestic demand and the Opportunities for international trade. International comparisons suggest that typical income elasticities of demand for agricultural products and manufactured goods in Latin America are on the order of .7 for agriculture and 1.3 for the manufactured goods currently produced. The income elasticity of demand for the capital goods and raw materials imported by Latin America is on the order of 1.5 or higher. Whether this demand should be met through in- creasing exports or through import substitution depends on each country's long term comparative advantage and the future export markets. If resources could be efficiently allocated, most Latin American countries could probably increase their national incomes at rates of 6 to 7 percent per year. On the basis of the demand elasticities just cited, 7 percent growth of Gross National Product would require exports or import substitutes growing at 10 percent, 39 existing types of industry at 9 percent and agriculture at 5 percent or so. In Peru, this pattern is met largely through export increases, since the country has both the supplies of diversified exportable products and the markets for them to sustain such a growth rate. Almost all Latin American countries have shown the ability to expand rapidly, 6 to 7 percent for 3 to 5 years, in periods when exports were expanding and thevaere not hampered by balance of payments limitations. This experience supports the thesis that it is not the shortage of capital or the ability to carry out productive activity that hampers development in Latin America, but rather the ability of governments to devise policies to channel investments in the right direc- tion. In reference to technology and the problem of the mix in underdeveloped countries, Currie (1967) indicated that utilizing the techniques of capital—abundant economies in labor-abundant economies poses peculiarly difficult prob- lems of varying the mix. The attainment of a better mix given the conditions of gross inequality and the difficulty experienced in deve10ping exports makes it probable that a dual economy of considerable magnitude can continue to exist even if more reliance is had on the price mechanism. But such an economy can lead to a perpetuation of the conditions flaking a desirable mix almost impossible to attain without wise and massive aid being given to the market mechanism. c ' ‘ u ever a. a n- _- nevi-‘5». u \ "‘io n" - “ on . ‘ I . "‘ .V'A- “h" -t..._ u :“u .:‘A .. fl ’- 5‘..“= h- . -V e‘ .. , "'-.. :"va. In. .- I‘.‘ .1... 'n ‘o \ .-A Q. h... ‘ .. e, .. o ~~ \‘a . . I I K . .“ a M [Hi “s A K N t: p .‘ V... ‘N » 40 The problem.of underdevelOpment has become one that cannot be resolved even by a perfectly functioning market system; more important are its dynamic and institutional elements that call for an approach widely different from the current extension of limited loans and grants and technical assis- tance. The favorite solution of all underdeveIOped coun- tries, an improvement in the balance of payments resulting either frommborrowing or by exports, can rarely be of the magnitude that would permit a pattern of consumption and a type of mix appropriate in the developed countries. A factor aggravating the inadequacy of capital in relation to labor is the generally shocking underutilization of existing capital and malallocation of new capital. The poor use of capital is a symptom of underdevelopment as well as a cause, just one of the many vicious circles that impede the effec- tive functioning of the market system. The mix can be improved by actual under-employed labor and capital being put to work to produce new capital and goods of mass con— sumption. In conclusion, to utilize capital-intensive equipment and provide more remunerative employment in general with limited imports is a problem requiring careful study by each underdeveloped country. Currie suggests a few general lines of policy and criteria for establishing priorities: a. Every effort should be made to use the market mechanism as far as it is feasible. This implies relatively high prices for imported capital goods I!) 3"! bann- h"? v- 5‘0. In Or, (D 41 and relatively low level of wages and salaries as long as a great amount of disguised unemployment exists. Quantitative restrictions on the purchase of foreign currency may be necessary to offset the effects of great inequality of income and lack of confidence. In applying rationing, the most difficult decisions will arise as between goods permitting future exports (or substitution of imports), public ser— vices, and goods permitting production of goods of mass consumption (including housing). Most public services are also mass consumption goods. However, too low costs and tariffs may encourage extravagant use. Even in the mass consumption industries, high intensity of use should be given high priority in permitting imports. Imported capital requirements can be reduced without loss of essential services, i.e., replace private cars for buses. Avoidance of patterns of consumption whose wide- spread adoption presupposes a capital abundant economy, i.e., the costly systems of processing and packaging goods like throw-away paper milk cartons and a host of plastic containers. 9 g .. I 'V .Q scy- . a ugh. Otto- "y... ‘lo - AF. ‘, Vb.- .'....;_ A. . n . \ ”1...“ y.. a...‘ O!- A - I- ---'*~’ buns h». ‘A"..h‘ .‘I‘. "m... " a . C “ ' 5‘... ‘\\ ": n‘ . ~ "‘" -.: - D l 11' in l ‘ fl“; u‘ I ‘ u “x. \ . ‘ - .‘u a ‘ -1 ~ 9-. ~~~ '0‘. u I‘ \. s . .'~._N" ‘ .H§ u e u.‘ .v.. , s . h e‘ ‘ L‘. ‘A-‘ .“u‘ Ii.- .. I A ' ~—~.‘~.‘ s ‘td. '- . \‘hN. . * ‘n ., ~"~ h . " C . I“ | ~- A. .' 2“ i n \‘ N ‘ O“ ‘ (.. . .‘ . \;' u a. s 42 f. Probably too much emphasis has been given to infrastructure. Imports for these purposes are universally accorded highest priority. Obtaining a more desirable factor mix obviously depends on the actual mix, the degree of inequality in income, the foreign balance, and other factors, which vary from country to country. We have here an important part of the explanation of the persistence of dual economies, and massive disguised unemployment or very poor mobility, and also a part of the explanation of self-perpetuating under- employment. Country Studies Chenery (1967) indicated that the more traditional studies are largely descriptive; more recently, country studies have become more analytical and have attempted to provide a test of one or more of the hypotheses derived in development theory. A further refinement is to select several countries which are similar in some respects (e.g., cultural heritage, levels of income) so that differences in deve10pment performance can be associated with some of the observed differences in the remaining factors. Studies focusing in Latin America have shown that in this region the failure of market mechanisms and of government policy to maintain equilibrium in the balance of payments and the resulting distortion of the productive structure emerge as .. 0 fl.- - ..... J: ' D . :- .," ‘0‘ - -_. A ' -.b“' D .0 x: - s.A a.» I ‘U ‘O l. t \‘ ’A 5‘ "H ' a ' ’1- 1 i- u . x" .. ‘ ‘M‘ V \ ‘§ "F. - ‘. . ‘. “ a \‘ \ K, . ‘l 'u, I . ‘ ‘\ 43 more important impediments to further growth than any overall shortage of resources. It has been observed a prevalence of regional inequalities and the tendency of deve10pment to be concentrated in a few favored regions, so deve10pment policy will be faced with a probable con- flict between the social goals of maximizing total income and increasing regional equality. Igter-Country_Comparisons The main objective has been to determine similar- ities and differences in the economic structures of coun- tries at similar income levels (Chenery, 1967). The work of Simon Kuznets in particular has revealed broad similar- ities in patterns of savings and investment, consumption, production, labor use and other structural characteristics. The notion of a discontinuity between advanced and under- developed countries has been dispelled, since virtually all elements show a continuous variation with rising income. It also provided a basis for comparing the historical changes in the more advanced countries to the present-day patterns of inter-country variation. The rise of the share of industry with rising income levels is quite similar in both cases, as is the fall in the share of agriculture. Of equal interest are the differences among countries that are sta- tistically associated with their size, natural resources, and other characteristics. .5 " . u ... l”. ~ .a‘ 3 """Vi- b...~. ' I .u. ”‘5‘ AA- "5 U». .. \.';‘ z \ 5.... .“2- ..‘ . .“: .. _“ \Il ‘~ ““2; 1 1 . .- l " “v- _ “‘ "7-5- .““CN' I“ _~ _ \‘I ~,‘ _ ‘u I \~ ‘ .“.h:‘ ”"- N. C '. '~ ‘1‘: ‘3 “ ‘V b A N»: N .. ME 44 Problem.of Increasing Employment in Agricultural Development Economics It was indicated by Dorner (1971) that agricultural policies emphasizing modernization and increased production from.the commercial farm sector without explicit attention to the creation of employment opportunities will yield increased output of certain farm commodities and growing labor productivity for a part of the farm labor force. But, they tend to widen the income disparities and throw the burden of adjustment on the disadvantaged who join the ranks of the landless, become migrant seasonal workers, continue to crowd into existing small farm areas, move out to rapidly shrinking frontiers, or join the under-employed in the cities. There is no evidence that the increased volume of commodities moving through commercial channels as a result of increased production creates sufficient jobs for workers displaced by modernization or for the continuing new addi- tions to the rural labor force. The policy that food should be produced by the cheapest, most efficient means possible, when viewed from the private interest of an individual firm frequently means displacing people with machines. The professional analyst will View the problem.with decision making criteria appro- priate to the private firm while ignoring the possible lack of correspondence between private and social costs and benefits. Dorner (1971) pointed out that it has become E I] ivufl. \ h .l I ‘e can “A. 0. HI ."‘ o . - .. “.T. I. ._H Vtgcqu .- ‘0. . I 1. ~ '0 1 ‘ - .I,~'. -. ' w... 2 ..._~ ‘ .‘ ~‘l i‘.‘ -, ..‘\'. ;. I. \ .‘ '- ‘ . Q“‘ u“.H ‘ I I .~ \...~‘:_ -.\.‘: K - -n . . ‘ .§__ ~‘a “"25 "e C “ \“. \H‘ s-.~v" ‘fi‘. I‘~‘A K,‘ In . ~~ . “:~ "0. t ‘y ' ‘ 45 an article of faith that mechanization, mechanical tech- nology and automation generally, always creates as many jobs as it destroys and sometimes more. This assumption may be justified in a highly industrialized nation; but it may not apply to a country that does not produce its own technology, since the new employment opportunities will remain in the manufacturing country. The majority of the peOple depend on the land for employment in most less-developed countries; jobs in manu- facturing are growing much less rapidly than manufacturing output; and the number of peOple dependent on farming for a livelihood is increasing. Owen (1966) has referred to the non-farm claim against that limited part of the total income stream which passes into the hands of the farm population as "farm-financed social welfare." This is the claim to maintenance at farm sector expense of any labor that is rendered redundant by the development process in that sector until such time as this labor actually realizes an alterna- tive employment opportunity in the non-farm sector. In order to achieve the benefits that may accrue, it requires that employment opportunities be provided in the farm sector. There is an implicit assumption that somewhere policies are being implemented to maintain full employment, and that when a laborer moves from a low productivity rural job, he migrates directly to a higher productivity urban industrial job. Todaro (1969) indicates that these are .“'V"' . a . “.uuvyv a - ‘-:"R\ . ' 4 ‘ u n- h 01~-~ 0“. ' . : :‘9A ‘- ‘1‘ 46 unwarranted assumptions in most cases of less-developed countries. Indeed, these assumptions point to some of the critical problems Of development. The question is rarely asked whether or not the typical unskilled rural migrant can indeed find higher-paying regular urban employment. The empirical fact of widespread and chronic urban unemployment and under-employment attests to the implausibility of such a simple view of the migration process. There is great difficulty in substantially reducing the size Of the urban traditional sector without a concen- trated effort at making rural life more attractive. In the less developed countries, the most abundant potential resource is labor; Dorner (1967) indicated there has been a tendency to ignore the need for investment in and development of the labor potential. Instead of viewing land as a vehicle for employing people and for developing the skills and experience required of the rural labor force, land has been viewed primarily as a resource to be effi- ciently combined with scarce capital so as to maximize agricultural output. The manner in which increased production is achieved, and the number of people who participate and reap some bene- fits from the experience, may be as important as the produc- tion increase itself. One gets a different perspective regarding the role of the land if (in addition to its accepted function in the production of farm products) it is viewed as a vehicle both for creating economic Opportunities h. 5- .uou‘.“" . 2" "~r.- .0 a. 1.‘_ I. uc. ' n a-.. EXC-- HE“ A ‘ ~- ‘0‘ .‘ A- V'». :I‘:;- .-. ‘ru :. h.‘. . ....-,.’e a, 5‘“ “' I 7r. ¢%~.U'c in. I A “'* in»: s .y‘ 5 g“ . \__ -D‘ ‘ . d5 £~“‘ h» ' \-. q» \Zao. A 1,. t. _ “ "A. . ' v: e- e.“ 5. ‘n ‘u‘. ‘.~u.‘.“ . 5“‘ s" _. , . “: H. a l «A ‘t‘b~" ‘s .~ . h-‘ ..‘.:‘ ‘ v- \ h "“~4 C.‘ a “ .‘E . ‘~ ‘»._ 3‘:- a: ‘-D ‘2' ‘a :; '0 ‘5 'V 3. 5—K “I¥I- ~~ ‘ ‘ .' \.- ‘ Q 1‘ a. . \‘C \\; \I g H " .I‘ u: 1 t v. in. s ‘3‘ 2. . "l‘s‘. ‘ S . .~Q_ ‘. N’. \ v , 5‘.“ ‘| ‘Q ‘,~I~_ \‘.‘ . 1 U ' u. . . S" 7 n -.- ‘~"‘ ‘*4: V 47 and upgrading the human skills and capacities required for their exploitation. Johnston and Cownie (1969) are of the Opinion that in an agriculture with an over abundant and growing labor supply, it is unlikely that one can make a logical case for importation of labor saving machinery if the problem is viewed from the standpoint of national policy rather than profit maximization of the firm. Johnston and Mellor (1961) and later Todaro (1969) agreed that if the agricultural sector is to make its most effective contribution to economic development, it must not only improve labor productivity for a select group but must also expand employment Opportunities. There is difficulty in reconciling mutually conflict- ing Objectives, like output maximization versus employment maximization. To Schiavo-Campo and Singer (1970), ideal would be the development of a technology which would lessen or hopefully even eliminate this conflict by making it pos- sible, under certain circumstances, to maximize output while increasing employment. It is also necessary to stimulate the transfer of existing technology to deve10ping countries and to temper its unsuitability with efforts at adapting it to the different conditions. A possible guideline for the choice between a capital—intensive, large-scale type of technology and a labor-intensive, small-scale technology has been spelled out by Lewis (1965) after discussing the possibility that 48 industrial growth may go hand-in-hand with a reduction in employment as a result of employment destroyed in handi- crafts, traditional forms of transportation, and Old- fashioned types of personal service. This possibilityis increased by the tendency of wages to rise sharply in the modern sector. The higher wages are, the more it pays to import cheap machinery from the deve10ped countries, and, therefore, the less employment investment creates. Most developing countries have to give the highest priority to providing employment now rather than to maximizing consump- tion or income or employment in ten years time. Studies in Chile and Peru have suggested that in those countries almost 30 percent of the non-agricultural labor force was under-employed (Lederman, 1969). Schiavo-Campo and Singer (1970) talking on the role of social security and its effect over labor utilization in deve10ping countries stated: "One of the fundamental obstacles to economic devel- opment is the fact that the developing countries have to rely for their modernization on the technologies Of the industrial countries, since the latter have a virtual monopoly.of-modern technology. Which has been deve10ped to conform to their own requirements and factor endowments, so it puts a premium on replacing labor with capital. The developing countries have the opposite problem--scarce capital and abundant labor. The technologies of the indus- trial countries require a high level of skill and industrial - u q a-.p_u - ~—-.n¢-n- . ‘. I I... o... . . ‘.‘ I- ~“"‘.u. q :y-u— ‘.“.- ~.' I ‘H- _ ‘N g I! . '.I. , . . -'.I ‘ u u‘ 5". '5... a My- . u‘. . "-..:\ ”I 5.. i ‘ O - u e s.. a -“ u. . ‘A ‘3 -":.>£ ._‘_' ; - “u‘ N If. _ O ‘ ‘- ‘ Q “\~\ ‘ h a \ ~~ . l “- ‘ " s . -. K -‘ \ nu u '- n_~y- . \ n “ ‘ - . 4 la .;‘. r“: .u ‘A ‘ ‘v u A .4 I“ ~ \. F. ‘ 5‘ :n \ VA 49 discipline in the installation, Operation, repair, and maintenance of the equipment. Yet, these skills are scarce in many deve10ping countries, which would instead need equipment that is easier to install, operate, repair and maintain. In such circumstances, a social security system of the style familiar in the developed countries, financed by contributions from workers and employers, may clearly have a harmful effect. By making labor more expensive, it will give an added inducement to producers to use more capital-intensive methods of production. This effect may be desirable in the advanced countries, but in the poor countries, it may further magnify the distortion of using too little labor and too much capital already inherent in the dependence on imported technology." From the standpoint of a private firm, the entre- preneur of a large farm enterprise may find the importation of labor displacing machines highly profitable due to a variety of circumstances, many of them related to government policies: overvalued exchange rates, subsidized credit, rising minimum wages and fringe benefits, etc. Eckaus (1955), reasoning from analogy, deve10ped countries expe- rience of farm enlargement and mechanization is sometimes cited to support this type of development. But such analogy is inappropriate for the widely different situation with respect to factor proportions and real factor costs in non- industrial societies, in contrast to existing factor prices e.“ d- ..--. '- - u .- .-.'» Uv‘- . M- v-‘uanv-z- _ nQ-wvoio a o . “An A . ~_ 9 .~— ..~_‘ _ '~.~‘ 4 ‘ Fug. .‘ .-I ‘1»... h 9- : __“. ~6. ‘ ‘l VA: bo- V- - on... fin“ '- -. .“ huh»- : ”~.fit-c- ‘~.. ‘v.‘ . . ‘ ‘ 5“ F-” - kg.“ . ‘ 50 which are often controlled and distorted by some of the above policies. Higher minimumwwages for farntworkers could be counterproductive so long as investment decisions in the farm sector are made by private entrepreneurs. Dorner (1971) pointed out that higher minimum wages might lead to a shift-to labor-extensive enterprises, or to an accel- eration of machine substitution for labor. Even with low wages, there is a strong incentive on large farms to mech- anize and simplify labor supervision. The mechanism Of allocating resources in under- developed countries, says Currie (1967), is not functioning properly either in securing a proper mix of factors, or in the type of goods and services actually produced. If the gap between urban and organized workers' pay and that of the rural and unorganized workers' remuneration is steadily widening, something serious has happened to the machinery of the mobility of labor, and labor is being very badly allocated. If, in order to improve agricultural productiv- ity, large sums are diverted by public agencies to agricul- ture, there is a further malallocation Of resources. The test of sufficiency in mobility, or goodness or badness in allocation of resources, can only be whether inequality of income is being increased or decreased. The proof of the inadequacy of mobility is the inequality existing in incomes from work . 51 Typically underdevelOped countries possess large numbers of peOple economically unemployed. They are char- acterized by great inequality of income,and this inequality is probably growing. Besides,the industry is characterized in large part by imperfect competition, and the economy is characterized by rapidly growing populations and work- ing forces. Currie (1967) indicated the combination of relatively small markets, economies Of scale, and modern technology tends on balance to make for relatively few industrial units in many fields and consequently for a lessening in competition in at least prices. In general, the economic mechanism of most underdeveloped countries is functioning badly. It ought rationally to call for a massive reallocation of labor. The reallocation that is taking place is in reality not sufficient to provide truly remunerative jobs for the increase in the working force, to say nothing of decent jobs for a large prOportion of the existing labor force. It is not that the people do not have unsatisfied needs,but rather that the economic system is not organized to permit them to satisfy these needs. At the same time the mechanism, Operating Obedi- ently in response to a distorted pattern of demand, is diverting resources to the production-of luxuries, to an enormous quantity of personal services and so on. The attainment of greater mobility, or a better distribution of the work force, appears to have played 1 :‘QA' 9—:. ---..0 "out . 0.. an, O .-o .._ '."-.oouV - .:.‘.§ .'~_ - l‘r..‘ -.‘~ - "‘- 6.- v “a. .- . .5 . - "I- \ - " A ‘..~ .;‘. Q. ‘ A- \k. '\ ‘h‘ 5‘ M...‘ v \c“ ' :V‘ In ‘ I‘; 'I V . ‘u "0 t. c Q“ 6 \u u . .- a‘. ; Hg:" 0 ~‘ ~ \. ‘~ .\-‘N u ‘ 3‘...:_-‘ t \..‘. \ a. VA 52 an important role in the deve10pment of economically advanced societies. Currie (1967) stated that whatever factor that impedes mobility, or a better distribution of the work force, as measured by a greater equality of earn- ings brought about by a relative movement of workers from lower to higher paying jobs, by the same token impedes the rate of per capita output. It is not the greater equality of earnings that in itself brings about a rise in per capita income, but only that greater equality which results from.the relative growth in numbers in the better paying jobs. Increases in output resulting from greater employ- ment or less disguised or under-employment, and from greater mobility or a better distribution of the work force, are closely related. The effect on output of greater employment may be offset by poorer mobility or by an increase in under— employment. Greater mObility may permit a rise in Gross National Product per capita despite increased unemployment. Even greater productivity may only be the consequence of better mobility. O Schiavo-Campo and Singer (1970) consider that some Obstacles to technological deve10pment of the deve10ping countries are their low capital formation, and their limited capability to evolve an indigenous technology. SO, there should be no exclusive choice between promoting indigenous technological deve10pment and stimulating the transfer and adaptation of existing technology. In a sense the problem ~- uvtn-u- 0 b . 0.--..- U . ~ ‘ 5.9 an... . - _ M .u. -y‘.-- h; nay.- I - Du buy-ca... - 'u. ‘ n n..:.‘ “I n-u.--. 5.. . Iu . \ w... ~=’ O ‘ .,-“-v‘.. -- a 5. hr ’ ¢.. \. q.“ .- - I .v .c u .I. “- "o ‘ A- ‘.-":u ‘n v e.‘ ‘ - ‘5‘ -§ _ “‘2‘” u If] . .O - s . n..‘- ‘\ ~‘s .. fl... .—-€- ~ A. :1 u \. L‘s ~:\L. \ ‘~ 5. Q .-‘ .- n \t '\ , v-A . ‘0‘ 'V“ V“‘ '. K“: _ . l‘ “ --.e - .I ._‘~ \A I. \ 'A I Q s-~ Vi ,. .“'- ._‘~ 5 s v -‘ {V . '- ‘e \ I: :. . .\ A ." =~\ “~‘ 0“ v . K‘ - n. ‘- . . e N. g ‘ i 0‘ J‘ ‘ .__ f... . ‘ ‘.y t. ~~ c. \ “‘Q ‘ " \é ' \ ‘ Cs ‘\‘§h ‘ \‘§ t ~. \'~ . A. ‘ ‘ U (D I f, 53 can be looked at in almost statistical terms: while the probability of evolving a truly new and suitable technology for developing countries is not very high, the payoff would be enormous; conversely, while speeding up the transfer and adaptation of existing technology can make a smaller though significant contribution to international development, the probability of doing so effectively and in the near future is significant. The contribution that the appearance of an efficient and up-to-date labor intensive and flexible technology could make to international deve10pment is so great that calling for allocation of at least part of-national and interna- tional development resources toward practical research in that direction is justified. In the underdeveloped world of today, Currie (1967) stresses, the failure lies not in an inadequate growth in aggregate money demand but rather in effective demand, and an essential element in this inadequacy must be sought in the chronic rise of industrial wages, profits, and prices above the national gains in production per capita. The obvious solution of the problem is to increase aggregate effective demand, production, employment, saving-investment, demand again, and so forth. But, the economic organization is not giving adequate employment and production, nor a defensible distribution. This suggests the necessity and the means of achieving a deliberate and massive concentra- tion of effort to raise within a decade the economic, .m- 1 ‘ . :uuv;:l 3:55., and C \ ..' .' _ ..1 ' .. .25 _::;..at13n . ii 129 internal ei ..’. L r - ‘l . a . A ‘n’. 1“ -.‘ In“: ‘obi‘ -‘I‘ b: .....‘ 1 ' ' _...-..ess pmcy c: ”511::a A Q t e.‘\" ‘ L 'V‘ ‘ 3V1; E!;~....~ 4.. _ J‘ I.. «n all 0.::- I . : .‘ 6“. ‘1 V r~0:94 c ‘5‘, a‘n ,: O ‘ s. «a?! ‘ h. I .n U. sue pr” ’. ‘ d ' q ‘ \ ‘§ ‘ e I ‘ \ 13 L. ‘ G x. \ s. ‘ \‘~: V 5 VI 3%: on. ‘Ne C24 '5 d“£ x‘ s..- ‘.!~ ’v' " trial ‘V 1e 6 "h .\ x ' \\ ‘4 u‘ ‘ 'a ‘3 M. ‘Hat E“n ‘.U|l‘h"fi _ H 2‘. 3“ \‘;“«." \- , - A‘S‘ ‘ *g 54 educational, and cultural level of the poorest halfor more oftme population. The cost in terms of foreign assistance mmithe internal effort required would probably be much less thmuthe indefinite continuance of the present desultory and Ixuntless policy of lending and refinancing which supplies jhmt enough to keep up a modicum of services for a contin- luflly expanding population, but not enough to check that expansion. The breakthrough requires as an indispensable cxmdition "an incomes policy" in important segments of the economy, especially in the industrial sector where groups in Eistrong bargaining position have become entrenched. This is a difficult policy for which to secure acceptance and execution. In all Latin American countries, the governing Cflass has made its peace with organized labor by securing axisharing a larger portion of a slowly growing production. KU.this has been at the expense of the unorganized and Self«employed, and at the expense of a vigorous and dynamic snowth in the production of articles of mass consumption. So little is the economic process understood that virtually {U.regard the gains of organized labor as signifying gains flu'the whole economy. Under these conditions, the dis- tribution of incomes becomes a highly arbitrary and even capricious.operation. All that economic theory can tell us is that enough must be paid for any service to call forth the requisite marginal supply to satisfy the marginal demand 2:115 an: 3&0: - O ‘ ‘ 555:2 cf mobllli » q ~.. 'QA“' "' "‘ N we at.-. uzzue . ‘ ‘ ~-¢-.Jn Pagan CES‘ n... ..‘ .....s acceptance agr‘ An} ‘ true 51 bux¢ L5 “- ' V- :”"~A ' ' ".he 0'“ 1" ‘ . u'ES-ti: d -. .21 . "‘k ‘x; ‘:. “u ‘3. .s"\" D: t‘fi “ose w: 'n.‘ \‘"\:E‘§-\Vfi ““«Y a‘ iS’N h s::'n' ug‘rg ' t 1‘- ‘u “S r“ \.‘5 N u l ”1’ One : 5A’a ~ "‘E 4 1“ ‘e§‘ra:‘ "s "‘1 cc . d , He in r ‘~ “ ..‘. ‘ \?tlfih ’ V“ l e‘ ‘ '- 15‘ q M - ~C‘lal " 'w“ «L g. “' '-. Q. ‘2: y. ‘118 an. HP 55 attme price people are prepared to pay. But, in the absence of mobility and competition, this rule is consistent vfixh very wide and ethically indefensible variations in :hmmmes. What is needed today is an overall national job cueation plan designed to eliminate poverty, which is of mfluous acceptance or implementation. The ILO (1970) report indicated that what is needed is to change the nature of the process of economic growth. kaull employment strategy will inevitably involve faster growth in particular sectors, perhaps in all sectors. But amen one treats employment as a specific objective, one Starts by investigating the labor absorption potential of each sector, and then searches for a balance between sec- toral growth rates which meet some employment target. So, employment becomes the target and overall growth the by- product, and attention is concentrated from the outset on sectoral detail rather than on the economy as a whole. To reduce unemployment is to raise consumption levels espe- cially of those who most need increased consumption, and incidentally also to strengthen the country's independence kw reducing its political vulnerability. The question is Intimately one of distribution; the decision is whether it is more desirable to raise the income and consumption at the bottom of the income distribution than to raise income and consumption in the rest of the community. To treat income as a net total, without inquiring who gains and who loses, and then set this against employment, is to miss the whole point. 9?,“ re is a . ‘ ' 1“- 21".‘33'3 me \a. at . ‘ "M ~~v~ hcwen+ lu- no... :8‘.V‘l~‘ nub .- 0 O 2 "e case of . '~ .- I‘V' . . :: wage of EC U O . ‘ .. . .. :..:.::3, a.“ it b .. ; - : $1131.. in S Ste ‘ '-. . ‘ -<- «4;: ten. (‘55 .4. 2:51:55 :1; ms: *'1 Sean-11y < \' s' 1 . .1." “-e n e'.“ (‘5‘ . 3‘ “‘-£-u¢ YV' tr: .“ :. ~1 Av ,: m e ‘ \A 0 V a 5‘. ~-*;‘ .e.y O“ Bro; § \. ..A U 56 There is a time dimension as well, with the need to judge. the value of more employment immediately against Imne employment in the long term. This arises most sharply 1h1the case of industries which have export possibilities. flmashortage of foreign exchange could block an employment strategy, and it follows that to overemphasize employment cmeation in some fields could be counter-productive in the longer term. Assuming that the foreign exchange constraint determines how much capital investment can be undertaken in aicountry heavily dependent on imports of capital, then the (mmmon sense policy is to spread this as thinly as possible fficial statistics, given some evidence of an accumula- tion 80 percent of their current market value. For small and me