Sunday, April 07, 2013

Improving Technology to Improve Productivity is an Important Tool for Economic Development

How are poor people in poor countries going to produce more goods and services and thereby improve their lives? This post argues that technological improvement should be a critically important approach, and that appropriate technology needs to be more effectively disseminated.

Isn't this a better way to carry water home from the stream?

Many decades ago it was thought that poor people in poor countries would leave their poverty if they just had more capital; that they would invest that capital in ways that would increase worker productivity making their countries richer and getting richer themselves. (Money transfers could be used to educate and train, human capital investments, or to better equip, or to provide better infrastructure.) It seems clear now that rich countries will not make sufficiently massive transfers of their wealth to poor countries to make this work; people will have to drag themselves out of poverty.

Demography can help. Simply increasing the population without changing its structure will of course result in more poor people. However, cutting birth rates rapidly results in a larger portion of the population of working age for a few decades, which in turn can increase the per capita GDP even if workers produce the same average amount of goods and services per worker. The effect is like that of reducing unemployment. If people can be moved out of relatively unproductive work into more productive work, that will also benefit the economy -- as when people in relatively unproductive jobs in the informal economy get more productive work in the formal economy. (When people move from unpaid work to paid work the change will contribute to the GDP; however, when women moved from child care and unpaid work in the home to paid jobs there was also a real cost to the society.)

Migration is a well tested way to improve ones economic opportunities. People in cities have more opportunities than do people in rural areas; history's greatest migration ever is taking place now from rural areas to towns and cities. Still the problem is often simply moved. Poor people in urban slums, like poor people in rural areas have to figure out ways to work more productively.

Fundamentally, however, economic progress results from people producing more from what they have (and saving part of the increase to invest in further ways to improve productivity). The United States has gone through a wave of reengineering organizations and restructuring markets and sectors (taking advantage of new opportunities provided by computer and information technologies) to increase productivity; organizing better for production and distribution is important. The Banco Palmas in Brazil is an example of mobilizing the resources that exist in a community to utilize them more effectively to increase the productivity of that community.

Still. it would seem that the major approach to improving productivity is to improve technology so that workers produce more goods and services. The improvements I am talking about are not simply providing more expensive machines, but smarter ones. Of course, the technology could take the form of improved crop varieties, or improved cropping practices, or better health services, or more effective educational services.

How then are technologies to spread, allowing poor people in poor countries to innovate in order to improve their own productivity. There is of course Practical Action, the grandfather of the field. How about the The Appropriate Technology Wiki Project, or this Appropriate Technology Bulletin Board, or the Appropriate Technology Appropedia, or the Appropriate Technology Group on Linked In, or the Honeybee Network?

Of course there are many examples of private enterprise approaches, where local enterprises manufacture appropriate technology devices and sell them. Think of all the companies manufacturing tools and the distribution systems that market their products.

One idea I especially like is franchising. Think of the fast food franchises that enable anyone who buys a franchise to equip a restaurant with its equipment, train his/her staff with the its training materials and programs, and even decorate its space with the franchising firm's designs and materials. The costs of the technology transfer are covered by the franchise fee, and the franchising firms even make profits. Could this approach not be used for home building, stove manufacture, and many other appropriate technologies?

1 comment:

John Daly said...

What more do poor people want? More food, better access to potable water, more protective shelter, more and better information, entertainment, better clothing, safety, more and better schooling for their children. At least these are things that I want for them!