A common characteristic of under-developed countries is the scarcity of capital and abundance of labor. In other words, the capital-labor ratio is extremely low. Common sense tells us that in such countries efficient production calls for labor-incentive technology. Let’s know the labor-intensive and capital-intensive techniques for developing countries.
Professor Nurks holds the view that underdeveloped countries should adapt labor-intensive techniques of production in the early stages of industrial development. But the majority of economists favor the adoption of capital-intensive techniques in such countries.
In my opinion labor-intensive technology is the most appropriate for underdeveloped countries like-Bangladesh. The reasons for my support are discussed below:
Labour intensive techniques
1. Employment argument: The first reason is employment. Bangladesh has an abundance of idle manpower. By using the labor-intensive technique, we can utilize the abundance of idle manpower and create employment opportunities.
2. Spreading total income: Through the adoption of labor-intensive techniques employment increases, the spread of total income generated more widely over the population of Bangladesh. Thus, per capita income will be increased.
3. Talent resources argument: In our country, there is an acute shortage of capital and entrepreneurial resources. The use of labor-intensive techniques would provide the opportunity to use our scarce resources efficiently.
4. Using simple tools and machinery: Labor-intensive techniques are simple. They require simpler tools and machines, which need not be imported from abroad. Thus, there is a saving of a large amount of foreign exchange.
5. Reducing inflationary pressure: In Bangladesh, the inflation rate is high and it increases day by day. Labor-intensive techniques are indispensable for contracting inflationary pressures in our country.
6. Using in the villages and small towns: The use of labor-intensive techniques is usually found in the villages and small towns. Most of the people in our country live in the villages and they may use it successfully.
7. Advantages of decentralization: As labor-intensive methods spread out into villages and small towns; they enjoy all the advantages of decentralization and avoid the evils of the factory system.
8. Avoiding monopoly: By using the labor-intensive techniques, the emergence of monopoly and concentration of economic power in the hands of a few is also avoided.
Arguments in favor of Capital Intensive Techniques
It has been strongly argued that those investment projects should be chosen which are capital-intensive rather than labor-intensive are.
According to Galenson and Leibenstein, “Successful economic development particularly in the face of gross backwardness, hinges largely upon the introduction of modern technology”.
The arguments in favor of capital-intensive techniques are given below:
1. Accelerating economic growth: Enterprise using capital intensive techniques lead to a large share of the resulting income going to entrepreneurs and a smaller share going to wage earners. As a result, savings increase, and a larger proportion of them are utilized for investment. Thus, the rate of economic growth is accelerated.
2. Offering long-term employment opportunities: Since the growth rate is much faster under capital-intensive techniques than labor -0intersive techniques, more emoluments will be offered to the labor force in the long run.
3. Increasing the tempo of development: In the majority of underdeveloped countries the growth rate of the population is very high and unless the capital-labor ratio is raised, it will tend to dampen the rate of capital accumulation. So, the use of capital-intensive techniques is indispensable for increasing the tempo of development.
4. Capital formation: Underdeveloped countries should choose highly capital-intensive techniques that do not become obsolete soon. Thus, a small production of capital goods is required to be replaced in the future and more capital is available for further capital formation.
5. The rapid increase of production: Capital-intensive techniques of production are more profitable the labor-intensive techniques because under the former productivity rises more rapidly in relation to costs.
6. Production of quality products: In reality, the use of highly capital intensive techniques leads to the production of quality production by lowering cost.
7. Impact on the economy: Capital intensive techniques have a far-reaching effect on the process of economic growth. A few capital-intensive projects have a greater total impact on the economy than a number of labor-intensive projects.
8. Management training: It bound to enhance skills and efficiency and assist in management training.
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