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AGRICULTURAL DEVELOPMENT SYSTEMS
EGYPT PROJECT
UNIVERSITY OFSALIFORNIA, DAVIS
APPROPRIATE TECHNOLOGY FOR AGRICULTURAL
IN
by
Frank C. Child
University of California, Davis
GIANNINI FOUNDATION
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APPROPRIATE TECHNOLOGY FOR AGRICULTURAL
INTENSIFICATION
by
Frank C. Child
University of California, Davis
Economics
Working Paper Series
No. 6
Note:
The Research Reports of the Agricultural Development Systems: Egypt
Project, University of California, Davis, are preliminary materials circulated
to invite discussion and critical comment. These papers may be freely
circulated but to protect their tentative character, they are not to be quoted
without the permission of the author(s).
May, 1981
Agricultural Development Systems:
Egypt Project
University of California
Davis, Ca 9561.6
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APPROPRIATE TECHNOLOGY FOR AGRICULTURE INTENSIFICATION
FRANK C. CHILD
Agriculture intensification is a convenient expression for a traditional
economic problem:
how to extract the maximum output from limited resources,
in this case, from agricultural resources.
response is also traditional:
technology or increase inputs.
At the most general level, the
increase economic efficiency, improve
I will talk today about the last two, in which
case the question reduces to choice of the particular kind of technology which
will be embodied in new capital information.
Since the output of land cannot he increased and the input of labor
doesn't help, capital is the critical factor in the growth process.*
A
decision to increase input of capital requires selection of a particular type
of capital embodying a particular technology.
In language familiar to all of
us, this is the question of choosing the "appropriate technology" for Egyptian
agriculture in the 1980's.
For years economists have studied the process of growth by dividing the
economic system into two sectors for analytical purposes.
In stereotype,
these sectors are arbitrarily but conveniently called "traditional" and
"modern".
Economic growth is perceived as a process of transferring labor
from the traditional to the modern as rapidly as the rate of capital formation
in the latter will permit.
Aggregate growth is limited, as always, by the
rate of aggregate saving and investment but disaggregation emphasizing the
*New and reclaimed land coming into production in Egypt is hardly
sufficient to offset the land lost to urbanization and waterlogging or
salinity. The Law of Diminishing Returns precludes raising output per worker
by increasing employment.
differences between the leading and the lagging sectors, illuminates the
problems of structural adjustment and employment.
Indeed, a little reflection
suggests that developing countries may acquire an employment problem, or an
unemployment problem.
Consider, for example, an economy in which the modern sector employs 20%
of a labor force which is growing at a rate of 3% per year.
Assuming fixed
coefficients of production, the modern sector must increase its output and its
capital stock at a rate of 15% per year to absorb the annual increment to the
labor force.
Modern sectors of newly developing economies often employ less
than 20% of the total labor force and rarely, if ever, grow at a rate as high
as 15% per year.
unusual.
On the other hand, 3% growth of the labor force is not
Unemployment as a concommitant of growth, while not universal, is
widespread in developing countries.
The absorptive capacity of the modern sector being limited, the
traditional sector is the residual employer of labor.
absolutely if not relatively, for many years.
It must grow,
But since productivity and
earnings of labor in the traditional sector are a fraction of those in the
modern sector, we observe, by the standards of the latter, the phenomenon of
underemployment or disguised unemployment.*
The saving requirement for growth is severely understated by looking only
at the physical capital requirements for industry and agriculture.
Human
capital is at least as important and expensive and more difficult to create.
Infrastructure, roads, communications, and public services, usually very
capital-using, will absorb a substantial share of society's capital formation
*One might justly say that incipient economic development doesn't really
increase underemployment; it merely makes the low productivity of the
traditional sector more apparent. The productivity differential may explain
why expectations rise more rapidly than income in the early stages of growth.
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but their contribution to productivity is difficult to assess.
If political
instability or external threat call for large police and military
establishments, the drain on society's resources can become staggering. Slow
growth and long-term unemployment could become commonplace unless additional
resources can be found.
In Egypt, I estimate, the labor force is growing at 3.0- 3.2% per
annum.
The modern sector accounts for something between 25% and 40% of the
Gross Domestic Product.
Capital formation must generate a modern sector
growth rate of 7.5% - 12.5% to absorb the annual increment to the labor
force.
Egypt has, at least in the short run, ample resources for such an
abnormally high rate of growth--if it uses those resources wisely.
There is a
large flow of capital imports from developed countries and a still substantial
flow from other Arab states.
Gross domestic saving as a share of GDP has
recently jumped from zero to nearly 17%, based largely on accelerating oil
sales and remittances from expatriate workers.
Current aggregate growth of 8%
and agricultural growth of nearly 4% are well above the historical trend.
The reliability and sustainability of these flows is a question calling
for urgent study.
Oil reserves are reportedly modest.
Emmigration of workers
is a mixed blessing; it has the defect that it attracts the more venturesome,
more skilled members of the labor force.
The host countries are nervous about
the number of imported workers and, in any event, there is a limit to the
number that they can use.
There is a different paradigm, a different perspective.
development may also he viewed as one of "modernization".
countries have the advantage of "late arrival".
The process of
Here, developing
The time frame for
development might be shortened by adopting, at the outset, modern, "best
practice" technology.
Essentially best practice technology would combine the
cheap and abundant labor of the developing country with capital equipment
based on the technology of the capital-rich countries of the world.
growth policy is terribly tempting, and dangerous.
Such a
Such capital formation
creates very high labor productivity but very few jobs; total output is less
than it might otherwise be because scarce and expensive capital displaces the
cheap and abundant labor.
The technology is inefficient; of course, a
determined government can always convert an inefficient mode of production
into a profitable one by providing sufficient subsidies: concessional
interest rates, tariff or other protection against imports, tax holidays, or
preferential licensing.
In its extreme form, it has been said that "best practice" modern
technology can be so productive that higher output will permit retirement of
displaced workers; they can be supported in idlenesss and the economy as a
whole will still come out ahead.
I note that even if this claim is true,
policy-makers might still opt against it because, as a practical matter, the
unemployed are rarely compensated for their idleness and, if they were, the
social cost of unemployment can he very high in terms of human dignity.
Recent emphasis on social justice in the development process suggests that the
latter view is increasingly common.
The counter argument for "appropriate technology" is based on traditional
microeconomic principles.
Succintly, the argument is that capital is scarce
and expensive in developing countries while labor is cheap and abundant.
It
follows that relatively labor-intensive factor combinations will be the least
costly, most appropriate technology.
Maximum output is obtained by maximizing
the output per unit of the scarce factor which, by consensus, is capital.
And
for any quantity of capital an increase in employment of cooperating labor
will add to total output and raise the productivity of capital, provided that
labor's marginal product is positive.
This principal holds for each commodity
or product and, for any given composition of output, for the whole economy.*
There are two exceptions to the above generalization. First, application
of a new technology which is both capital- and labor-saving will cause some
technological unemployment but should still be adopted. Maximum growth occurs
at the expense of rapid reduction of unemployment.
Such cases are rare.
Secondly, if the use of a capital -intensive technology alters the distribution
of income in such a way as to increase the rate of saving and capital
formation, a higher long-run growth path is possible.
To my knowledge there
is no empirical evidence that the postulated circumstances exist.
Another possible exception comes to mind.
Many products are inherently
capital-intensive because of scale economies (motor vehicles), because all
feasible, technologies for the product are relatively capital-intensive
(information retrieval systems), or both (petroleum refining).
Industries
with these production characteristics are commonly found in capital-rich
economies. For a labor-abundant economy, it is normally more efficient (less
costly) to obtain such products by trade, that is, to concentrate on other,
comparative advantage production and export in exchange for imports.
Outward
looking, export promotion polices, rather than protectionist, import
substitution policies, have proved very effective for countries of East and
Southeast Asia which exhibited the highest sustained growth rate in the world
during the 1970's.
*More elegantly: if the factors of production are normally substituable
for each other over a wide range but at a diminishing rate, the least cost,
technically most efficient way to produce any quantity of a product is that
which employs the factors in proportions which equate (positive) marginal
productivities with realative scarcities as measured by price. If factor
substitutability is discontinuous, if feasible factor combinations are limited
and discrete, the principle still holds.
It follows that output and employment will be maximized by use of the
appropriate, relatively labor-intensive technologies.
The social goals of
maximum output, employment, and growth are fully compatible.
There is another reason why development planners may choose to promote
large-scale, capital-intensive technology: technical assistance (or government
licensing or subsidies) is more easily administered when there is a limited
number of recipients; administrative convenience tilts the planners'
preferences toward a few large producing units which have already accumulated
some resources, managerial skills and expertise.
Similarly international
corporations, asked to contribute to the economic growth process, are more
interested in working with the same indigenous firms.
Also, they are less
interested in a high but risky rate of return on their capital than they are
in management contracts or markets for capital goods produced elsewhere.
The
result is a symbiotic relationship among government, foreign investors, and
domestic groups, one of mutually reinforcing status, power, and wealth.
Sometimes such a system can generate a satisfactory rate of economic growth,
albeit one accompanied by a skewed distribution of income, substantial
unemployment, and neglect of small-=scale enterprise and of the middle-class
entrepreneur.
Examples abound:
Pakistan during the 1960's, Brazil and
possibly Kenya after 1965, and Mexico during most of the post-war (WW II)
period.
We will never know what the economic and political circumstances would
have been in the absence of the policies actually followed in these countries
but experience elsewhere suggests that growth, at lower social cost was
possible.
Promotion of more labor-intensive technology will require a dramatic
reversal of development policy in Egypt.
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Further investment in projects such
as fertilizer plants, plastic pipe or tractor production are at least
dubious.
The proposed steel mill and the recently announced nuclear energy
bio-gas
plants should surely be re-studied. Plans for a major investment in
should surely be abandoned.
As for agriculture, most of its share of
government-financed development projects have gone into the new lands which
have yet to generate either income or employment.
Other major projects,
relics of the past, include the fully-automated poultry projects which employ
.
a minimum number of workers, and the showpiece "mechanical farm" in Tahrir
The latter has an abundance of complex machinery and virtually no employees
when I last saw it.
It is reported that the average capital requirement per
job, created by investment under the "open door" policy is LE14,000!
There are alternatives.
World bank studies suggest that improved
irrigation and drainage facilities in the old lands would benefit more, poorer
farmers, and would yield a greater return than anything in the new lands
area.
New and improved plows and seed drills are more appropriate than gang
s are
plows and tractors; stationary threshers and, possibly, mechanical reaper
better than combine harvesters.
They will improve soil preparation,
.
facilitate planting, reduce seasonal bottlenecks and enhance yields
On-farm
insects, and
storage equipment would reduce loss of grain to rodents, birds,
the weather.
Small, powered equipment and low-lift pumps would reduce
poultry
reliance on animals. Feeding and watering equipment in the burgeoning
industry should find a ready market.
common:
The capital goods listed above have several characteristics in
they are small, relatively uncomplicated and inexpensive.
Small-holders might
r and raise
reasonably afford them. They would make their toil lighte
vely labor intensive
productivity and income. They are fabricated by relati
investment
methods, investment per worker is low. They create profitable
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outlets for the modest savings of moderate income households.
At the same
time production by local, small-scale enterprise will create off-farm
employment opportunities in rural areas and reduce urban drift.
Similar development programs may be found in forward linkages, in
marketing, distribution, and processing of agricultural output. Small, laborintensive enterprise offers more hope for growth of income and employment than
large-scale citrus and sugar projects in new lands agriculture. For example,
modern food processing would surely improve the quantity and the quality of
the nation's food supply.
While substantial capital equipment is required for
pressure cooking of fruits and vegetables, there is no need for automated
assembly lines. Products may be cleaned and prepared and the tins packed by
hand; after cooking the tins may be handled, labelled, and boxed by unassisted
labor.
And so it goes.
Selection of so-called modern
capital-intensive, most advanced
technologies as a short cut to growth is a snare and a delusion.
And by
concentrating production and the growth of income, it engenders social
injustice and political instability. The time is short.
Now, while Egypt has
an abundance of investable resources is the time to Invest in programs which
can be shared by the majority of the population.
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