Industry, employment and the developing world

This report traces the general issues under examination at a seminar that was held in November 1974 at Oxford, jointly sponsored by IBM United Kingdom and the Overseas Development Institute.

During the seminar, the contribution that foreign private business, in particular British private business, can make to the employment objectives of developing countries was discussed.

The report is based on the four papers which were presented at the seminar and highlights that increasing equity must accompany aggregate growth. One of the most obvious means of achieving this is the creation of jobs, which represents a redistribution of income without any levelling through taxation. Developing country governments have also shown concern on this issue and wish to correct the serious imbalances that pose a threat to their political stability.

Said imbalances are mainly: intense frustration among job seekers unable to find work and remuneration they expect, inadequate incomes from work, and under-utilisation of labour. However, they cannot be corrected by chiefly cutting down unemployment, nor do all forms of job creation help. What is needed is a solution which creates productive jobs, achieves better equity, utilises labour fully, and provides an adequate income, with a net positive effect on total employment.

For these reasons, the supply of capital, technology, and skills which foreign private business can contribute might be of fundamental importance.

The discussion group which dealt with foreign business in developing countries argued that considerations of long-run efficiency and competitiveness in international trade should, in any event, induce rich countries to transfer their resources out of sectors in which they do not have a comparative advantage, such as labour-intensive processes.

But in the short term, the change may have painful political and social repercussions, and there may well be pressure on companies, from the labour side, against actions which involve the loss of jobs. Thus, the need for more comprehensive programmes of adjustment assistance in the 'donor' countries was suggested.