THE ROLE OF MANAGEMENT IN ECONOMIC DEVELOPMENT-Frank A. Heller - Printable Version

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THE ROLE OF MANAGEMENT IN ECONOMIC DEVELOPMENT-Frank A. Heller - Manish Jain - 08-13-2020

THE ROLE OF MANAGEMENT IN ECONOMIC DEVELOPMENT
Prof. Frank A. Heller, University of California, Berkeley, USA.

Who has a greater impact on economic development, the manager who produces goods and services, or the government economist who prepares fiscal policies and budget strategies? This may not be a fair question, put in such stark contrast, yet I believe that most businessmen and Government officials in underdeveloped countries would vote unhesitatingly for the economist. Of course, it would be persuasively argued that business has a crucial part to play, as long as the economic stage is properly set accord ing to the appropriate rules and conventions of fiscal policy. While it is difficult to deny the logic of such an argument, this article will attempt to show that in many of the so called "economically developing countries, responsible people should pause longer than they customarily do before answering the question which this article poses.

The arguments on either side are of considerable importance to the businessmen, be he in the highly industrialized or in the newly developing countries. If informed public opinion is right in putting its money on the economist, then the indigenous businessman would be justified in sitting back calmly until all the ground rules had been properly developed and implemented, waiting for the referee's whistle as it were, before throwing his energies into the battle. Unfortunately, in the poorer countries this is to some extent, what actually happens. To be sure, the businessman does not really withdraw altogether, but he prefers to be minimally involved and to wait for the Government to make all the important moves before he is willing to commit his unstinting resources.

Furthermore, it seems that neither the specialist in development, nor the businessman, can be persuaded by the mere example of history, for it can be shown that neither in Europe, where the industrial revolution started, nor in the United States, where it reached its highest form, did anything like favourable conditions exist before the great inventors and entrepreneurs set to work to fashion our modern way of life. Communication and banking systems were rudimentary, the workers largely untrained and the Government and the entrenched interests often more indifferent than benevolent. In the welter of sophisticated arguments and emotions the simple fact that neither Government, nor economists, nor policies can in themselves produce wealth, is often overlooked.
Macro Economic Prescriptions
Before giving examples and research evidence, of weaknesses in modern management in developing countries, let us briefly look at the traditional economic position. It is said that the fate of underdeveloped countries depend, inter alia, on the following factors:
1. The amount of capital and technical knowledge that can be obtained.
2. Stimulating export
3. Keeping a reasonable balance of payments and a low rate of inflation.
4. The availability of a suitable network of communications, such as roads and air ports, etc. Since this requires capital, it brings us back to point 1.

These are the prescriptions for the poorer countries that we hear about again and again, in lectures, in textbooks and in voluminous reports. The role of business and its managers in the process of development is hardly ever mentioned. Yet, it can be shown that the first three of these four factors certainly depend to a considerable extent on the effectiveness of individual businesses, their consequent capacity to save some of their resources and their willingness to invest this saving for future growth.

The currently fashionable analysis based on what is called "macro" economics, rather than on "micro" problems, such as the effectiveness of the individual firm, leads to negative attitudes on the part of businessmen. The manager is inclined to do very little himself and to blame the government a great deal. Even more important, perhaps, is the fact that the "classical" prescriptions of the macro-economist are likely to have particularly dismal results for the newly developing countries in the next few years. What are the hard facts? The need for large infusions of finance, particularly on the desirable long term basis, conflicts with the present acute shortage of capital all over the world and the prevailing high rates of interest. The suggestion that budgets should

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