Business roundtable; The rich and the poor nations

The following program is made possible through a grant from nation's business. This is a business roundtable a program of current comment from leading members of America's business community. Today Dr am Agarwal head of the department of commerce and business administration University of Iowa hog India. And Dr Peter J. Lloyd assistant professor of economics Graduate School of Business Administration Michigan State University will discuss the rich and the poor nations with series host Alfred L. C. Lee Dean of the Graduate School of Business Administration at MSU. Our topic today the rich and the poor nations is a problem of worldwide concern. And improvement in the standard of living of two thirds of the world's people. Is considered necessary in order

to provide some measure of political stability. Aside from the question of humanistic values today the highly industrialized one third of the world's people are doof and consume approximately two thirds of the world's goods. The rest of the world's population live mostly under conditions of poverty and want. With their rate of economic growth stifled to some extent by a population growth equal or exceeding in many instances the increased national income the immediate past and current rate of economic growth. For the rich countries far exceeds that of the poor. The economic gap between the rich and the poor is steadily widening despite large financial technical and educational assistance from the rich nations. What has gone

wrong. Why with the best of intentions has assistance from the west to the developing countries not brought about desired results. A steadily increasing standard of living. Dr. Lorne what is the record in the developing countries with regard to their economic growth during the past decade. Well do you see any. I think the primary aspect of this growth is that the record is very mixed. While it is true that a large number of countries have had very little growth at all. And indeed there are a few unfortunate countries such as Indonesia which have registered no growth or even run backwards. On the one hand there are on the other hand quite a number of developing countries which have grown very rapidly. There are several outstanding examples such as Taiwan the Republic of Korea. Hong Kong and Mexico whose national

incomes have grown at rights of 6 and 7 and 8 percent per annum. And in these countries incomes even in per capita terms are increasing rapidly. But are these exceptions. Figures of the 78 percent of the range. They are the best performance. What about the lower end of this range. Well the lower end of the range can include a large number of countries especially in Africa. It also includes some other large countries such as India. Who have not had very marked increases in in the last 5 or 10 year period. Dr Obama as you know well United States has long been very concerned with India. I think the countries have had a history of friendship and as a result of this friendship and the importance of India in Asia there has been great concern in the United

States about. Various types of assistance to your country. And as one of your country scholars in the field of economic development what are the facts with regard to India in terms of its economic development the past 10 years. I think that when we are. Thinking in terms of the rate of economic growth we might take a loan. Or feed it into account and as you would even know economic planning in India began in 1950 51. If we calculate the rate of growth since upon 1964 pretty satisfactory 3.9 percent or an M has been the average increase and on national income since 1964 till 1964. Yeah there's a sofa but capita. Income is concerned it has increased by 1.8 percent. No I quite see that it is.

Possible to fill their budget but if you're dissatisfied with either their lives or we are dissatisfied perhaps for different reasons but we have to look to the pre-history of economic growth if we look to the British period then view it. Traditional society with the rate of growth just equal to 0.6 percent or in. With whichever national income that was raising and if you compare this with what we have achieved now then of economic progress is fixed to 7 times faster. Whatever they said we are not satisfied because it is movie and had been national aspiration. Little is going to and I noticed also in traveling in some other countries of the world there is considerable comment about the development of agriculture in India. A feeling that the agricultural sector for combinations of reasons as been somewhat neglected. What do you think about this.

Well I mean every little bit of criticism both in India and outside. But somehow I have never agreed very much with this point of view. Now if you look to the increase in agricultural output as a whole in full bloom to non-food gleans then during the last 15 years there has been a rate of 65 percent which is very substantial. If you want to live in the conditions in India and under those conditions this progress seems to be quite satisfactory. Food in production has risen by 37 percent cash crop production has gone up by 75 percent. But here they said we do not feel satisfied because in other words the food grains we're talking basic about wheat and rice are the staples of the diet. So these are the most important items and the terms of the agricultural situation. Dr. Lloyd what's been the

situation in agriculture in some of the other the developing countries. You likely had a problem similar to when do you is this growth rate. Probably the same. No I don't think one could extend all of the remarks which doctor I go out to has made to the world or the developing countries in the world as a group. Indeed in the decade of the 1960s agricultural project was in these developing countries together has only increased by about 1 percent per annum. Now this increase is less than the rate of growth of population. In short there is less food but the Food and Agricultural Organization of the United Nations three or four years ago estimated that some 60 percent of the population of these countries are suffering some from some form of an inadequate diet. And that hasn't changed.

Well these countries most of the developing countries are basically agricultural economies. And in this one of the reasons that we call them underdeveloped or developing countries. And if a group culture is in a sense the predominant economic activity why does it appear at least to many people that emphasis has been put in other sectors of the economy and certain types of industry rather than attempting to increase the productivity of the agricultural sector. I do not really know if that would apply to all the countries of the world. Sometimes we make huge investments in every culture and we expect the deadly cultural output would increase tremendously. It does not and that is not because of technological reasons or for want of investment. But that is for the reason that the finances will fall into this. Every cultural sector they're not going to administer in a

variety of ways and you might see it as respect for the investment in many. And because of this the performance is not so good. In other words you're saying that the government management the efforts to increase the agricultural productivity have not been very effective. I mean I mean that that is or in my opinion the most important single factor which can help. The culture brothers and something has got to be done about it. Let's turn to another facet of this problem Dr. Lloyd mentioned. In many of these countries the increase in agricultural productivity. Was just staying equal to in some cases not quite exceeding in some cases a little below the increase in population. This is a major problem in India isn't it. What what's being done about.

The position is this that we produce about 90 million tonnes per year of acquirement 200 million tonnes so. The deficit is not so great that we cannot wipe out we came. We might have done it but for bedwetters of bad weather we had bad crops for a number of years recently. But. If there's a good. Crop. In the year 1967 68 the situation would change of course that would not mean that that would change for a great many years. We will still have to make a first. But. The pollution in India is this. That we know. What could be cultural in pubs like fertilizers groups etc. are needed for increasing friendly cultural group. We also know what technologies would be off. We knew that the question now was to have

any good quantities of these fertile a dozen good seeds to introduce the new technology. Or in the fields. Where there's a difficult problem is we're lazy In other words this is a basic problem of resistance on the part of the small farmer to change. This has not been our experience. Or it it just tends to change. But to what extent to disable logical and to what extent it is economic. It is hard to distinguish. Now if we expect a very poor cultivated by lasers group CVS that means a great deal of investment in us tomorrow he's not sure that there will be good weather for good crop. And if it doesn't then he's doing it. So he just you know true. You know Dr. Lloyd let's go back a little to this population question that we were talking about. What's going on in most of these developing countries with regard to an attempt to

slow down the rate of growth in the population. Well in this respect the general situation in the developing countries has changed dramatically in the last five years or so. There has in fact been a revolution in methods of population control systems largely from the introduction of new methods the intrauterine device and other methods of population control are both much more effective and much cheaper than the traditional methods. And these have been introduced in several countries Taiwan Hong Kong and for most notably And in those countries the birth rate has already after only three or four years of the programs began to decline noticeably. In other countries you cite are relatively small countries. Take your country again some of the larger countries in Asia like Indonesia Pakistan and India. Are you optimistic about the development of family planning in these countries.

Relatively the difficulties may be greater because of the size of the country. But even so the methods have proven successful in several countries. There is no reason no technical reason and any case why these same methods can succeed in other countries and how the scale will be larger. The government will have to sponsor such programs that cannot be undertaken on a private basis as they were and for most for example. But I am an optimistic like Dragonball or are you optimistic in this respect in your country India or U.S. air. We're certainly optimistic a good deal of work is being done. And formerly perhaps really an extension that we really does not feel about population control. But the recent surveys indicate that that is probably not such a great difficulty at first. Put it one time particularly with the younger people or younger people are more willing even under educated in the people in villages seem to be willing to have some kind of population control. And so if it had you could just dress up and send

it up Lloyd said the did has certainly been a mental evolution is every bit problem. Population control. Neither would you think then within the foreseeable future that India is going to be in a position to slow down its rate of population increase which by the very nature is so doing will make more food available assuming an increase in production of food over the time the per capita basis being silly the difficulty about population control is that whatever other endeavors we might meet in Riyadh making these affairs will result only after a certain number of years saw or in a short period of time that is not going to be much change in that if the population grow then maybe a little gain will be lost but that need not already Yes very much. Or what about a foot. We make no I'm going to produce this as up sometime. Well let's look at another aspect of the problem we've been talking a little here about what actually has happened in the developing countries. We've looked at some of the agricultural problems the

population problems what about the industrialization problems all of the industrial countries and I have visited. Many of the industrial countries in Europe their route to growth has been very high in recent years. It's very significant when you travel from Europe to some of the Middle Eastern countries then on to Asia to Africa. The industrialization of these countries is Brazil proceeding at a relatively slow rate compared with the more highly industrialized countries. What do you see as the problems here. Why have not led rather large infusions of different types of assistance. Why haven't these countries industrialized a little faster rate. Well I think there are several fairly obvious factors that one can pinpoint. One of the major perhaps the most important difficulty that many countries face is trouble with their balance of payments. In most cases the capital goods and machinery plant textile factory

equipment and so forth that they require must be imported from one of the more developed European or American countries. Now the balance of payments and exports do not grow at a fairly satisfactory rate. Then they simply find they can't import the equipment which they had planned on putting or they may not be able to import the raw materials which simply means that large factories will stand idle or work at 50 percent of capacity. Nobody has got to be a little more favorable balance of trade. They've got to be able to sell some of the type of products that they are now producing abroad in order to earn currency to buy the things they need for industrialization. Very definitely. I think this is perhaps the one fact upon which more attention is being concentrated now in the United Nations and elsewhere and more attention than any other aspect of the growth of these countries with our drug awhile and some of my visits to India over the years I have noticed some.

Very modern industrial plants. And I have the latest equipment latest assembly lines. First rate operations. And yet they are not producing anything close to capacity. Now as an observer who just looks at this in the passing scene compared with you who live in the country and have an intimate knowledge of this what are the real causes of the less than the maximum utilization of the existing plant capacity you have in some cases in DC only two that you might question of cost as you know we have based out of What Matters our cost of production is much too high. Basically the problem is one of good management. You might say Good administration of the economy as a whole. Or would it ministries and management of industry enterprises this

is I think a very important point. As a metric whenever we. Come across a new obstacle people have a problem they never become because any feel you are on any front end unlike the situation we come right to the problem of with in a situation. And all in India it's probably not a developing country to do D has to be done to improve and too many people never to think that mission management is one of the key lacks in your country. I should think so because I observe again in India that you have a large number of engineers scientists and other peace people of technical competence that ought to be able to in a sense turn out the goods and production line but it seems to me that many of the factories you mention are not well operated or manage. This is an interesting point that you brought out. I think that I have observed this in many of the developing countries of the world that I have visited

that one of the Boids in their thinking and economic development has been the education and the development of people who can affectively administer whether we're talking about administering in a government in a ministry or whether we're talking about it ministering in the sense of running a business whether it's owned by the government or whether it is owned by private enterprise. Lloyd what do you think of this. Well I would agree. I scarcely see how one can disagree. In addition to administration problems and corporations and firms of these countries I think. The same arguments can apply to government administration. It's difficult for people of this country in particular to realize that in other countries. One has to make application to import any machinery or unsound one has to obtain a permit to buy land a permit to hire labor. There are all sorts of regulations which restrict the freedom and I think the initiative of

businesses. Now there may be good reasons for them but they do inhibit the growth of some businesses. You think that the environment the basic environment in India is conducive to the development of private enterprise. I didn't really actually think so. Now they're returning to a problem and the problem with this. If we are guided by the professions and the speeches of politicians. And also sometimes the various documents turned over plenty commission we do get a very very definite impression that India is going to be socialistic and private sector is doing. But if we look to the figures the growth rates we find a place that is expanding in booming and public sector. With all that is being said in its favor is not being very is not expanding that replicate. And purely on economic grounds. I see no case for public sector India not in political or emotional

grounds billion economic grounds that was grounds a performance oriented environment and India has been such that foreign investment has been encouraged. Well so far as laws are concerned in the facility that the government gives they're concerned. The government right from the Times of Nero has been very particular and really wanted it put in capital should go. According to their thinking they have provided facilities. And or easing in recent years more and more 30s more and more relaxations have been made for instance. Now we are fighting for their own 51 percent of equity. Now there's no restriction about all remittance or profit or repatriation of capital and the other big concessions. There's a reasonably recent concession of Iran recently introduced in other words up to recently where it was not possible for a fern to have 51 percent control foreign firms have

51 percent quarter over quarter 9 percent you're right 51 percent. Nor was it possible for them to remit profits back to the home country to the extent that they can profit there. There were some distinctions but not a goal. I don't write is generally true in most of these developing countries some of the type of things like Draeger while it mentions. Yes I think there has been a relaxation of controls on foreign investment and they're sending home products and things in many countries in the last few years. However there are several other countries which retain pretty stringent controls over investment especially investment by large foreign corporations in manufacturing industries and extractive industries in these countries. And I have been going over there some of the events of the past decade and I think we might turn to what do we do for the future. In other words what is a sound economic policy for the future development.

Roughly two thirds of the world's population. What should we be doing. Perhaps that we are not doing. What should these countries be doing that they were not doing. Lauren what would you think we ought to be doing. Well Dean Staley I would say first of all that the primary burden of development must lie with the developing countries themselves. They are the ones who are going to supply the bulk of their own capital and most of their own entrepreneurs and business men. And it's by their efforts that they will succeed or fail. However this does not mean that there aren't many things that the richer or developed countries cannot do. In particular I think perhaps more foreign aid and also the turning of foreign aid in the center of our government to government foreign aid principally also includes aid from the well banking went to other world agencies. Doctor I don't want to.

Some people hold today that it's impossible. For government to government assistance to really be of the magnitude that is necessary to make a real impression in economic development in much of the world and that private enterprise is going to have to contribute a very large amount to this. What's your thinking on that subject. We're you given that I think you could do it and I think it would be good if they were investment flowing to the developing countries that's going to help them in more movies. And one because of even they were talking just not about good administration and new technology is seeping down to the lower levels. People there don't possible when private investment goes into these countries. I'm going to take it that you were in general agreement that we need substantial sums of money from the Western world to the developing countries primarily from government to government basis and that we also need some rather massive infusions of money from the private sector as well as the private sectors technological and

managerial know how that the latter two may be almost as important as the money. Is this generally your opinion. Yes definitely I don't think we should overlook technical assistance of various kinds. Not only in business and manufacturing but in health. Fear indeed in virtually every activity of these countries. What do you think of a proposal that's been made that instead of for example the United States giving technical assistance to company countries it selects to do this do in France the same in Great Britain that this money be given to the United Nations and in approximately one percent of the gross national product of each country into a fund administered by the United Nations for. Assistance and development what do you think of this doctor right away. Well it is slightly outside my feedback. I think it a good idea. 1 percent of the national income could be contributed by it was going to the. Which may go into the a developing country

that would be a wonderful thing in the interim period but this is politically feasible Dr. Lloyd. Well I'd take a different line. Doctor I got a lot on the subject. First I don't think it's feasible. I don't think there's a chance that such a scheme would be adopted that made logically feasible that the major governments who give out most of the foreign aid the United States French and British governments would not subscribe to such a scheme I think. And secondly I'm. Not myself. Happy about the proposal for an even 1 percent from all of the developed countries. Well Dr. Loren and Dr. Agawam there's been a most interesting discussion about the rich and the poor nations. Apparently there is rather general agreement between you on some of the problems and some of the possible solutions including a continuation of assistance from the rich countries to the poor and a government to

government basis or assistance from the private sector in the sense of development plans technology and administration. Participating in today's business roundtable where Dr am Agarwala head of the department of commerce and business administration University of Iowa How about India and Dr Peter J Lloyd assistant professor of economics Graduate School of Business Administration Michigan State University also where the program was Alfred L. C. Lee Dean of the Graduate School of Business Administration. Imagine you know the topic for next week's Business Roundtable is do we need a federal income tax increase. Now. Guests on the program will be Dr. Roland I robbed Ansen professor of financial administration Graduate School of Business Administration MSU

and Dr. Paul Hugh Smith assistant professor of economics also of the Graduate School of Business Administration at Michigan State University. This program was produced by the Graduate School of Business Administration and the Broadcasting Services of Michigan State University under a grant from nation's business a publication of the Chamber of Commerce of the United States. Business Roundtable is distributed through the facilities of national educational radio. This is Annie are the national educational radio network.