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In Bombay, although the evidence is somewhat less conclusive, commitment to industrial employment was not difficult to achieve. Neither the multiplicity of languages nor the institution of caste seriously affected employers' ability to obtain a labor force committed to the factory system.

The labor force brought into industry certain ideological preconceptions typical of the scarcity-ridden countryside. The transplanting of the scarcity orientation into industry can be seen in the efforts by workers to freeze industrial employment relationships into a quasi-hereditary system reminiscent of the village systems. These attitudes have been perpetuated by the instability and insignificant growth of industrial employment opportunities during the past century. But the very effort of workers to stabilize work relations, to give them a traditional character, is in itself strong evidence of commitment.

Despite the varied regional and social origins of the textile workers of Bombay and the steel workers of Jamshedpur, there were strikes early in the history of both industries. These strikes revealed the workers' capacity quickly to create informal group relationships, but are themselves evidence of commitment to industrial employment. Whereas strikes and the informal tradition of cooperation among workers came early, its formal expression in trade unions came much later. However, at the time of independence in 1947, Indian unions were ineffectual, as yet incapable of solving the particular administrative problems that beset all industrial unions. Since 1947 strong, independent union growth has been inhibited, perhaps permanently, by the increasing importance of the state in economic matters. Economic development in India is coming too late and under too great political pressure to permit the recapitulation of British and American trade union history.

The growth of an industrial system depends not only on the commitment of workers to factory employment but ultimately on their flexible acceptance of continually changing work requirements. Here, it is important to recognize that consciousness of scarcity has not been a ubiquitous feature of the Indian industrial labor force. Among those groups whose jobs provided prestige and experience with advancement, the sense of scarcity was quickly supplanted by consciousness of opportunity. It is quite clear that the development of a disciplined industrial labor force, flexible as well as committed, depends not on the psychology of the rural population from which the workers come, but on the rate of expansion of industrial employment opportunities.

11 CHANGING DEMAND AND

CONSUMPTION

Richard H. Holton

The literature on the economic development of low income countries offers surprisingly little comment on the role of consumption expenditures in the process of commitment of the labor force. In the aggregate these expenditures have been examined at considerable length, generally as a by-product of the discussion of capital formation, but their composition has been grossly neglected. This paper indicates that the composition of consumption expenditures may have much more to do with the development process than has yet been recognized.

The consumption of specific goods has frequently been discussed, for invariably the development plans for an economy include some consideration of the local demand for various goods that might be produced locally. Peripheral comments about the small size of the local market, the possibility that consumers have a preference for imported goods, etc. are generally injected; but no one appears to have projected beyond the immediate future the pattern of consumers' wants in developing areas. Such projections would seem to be worth while since these wants will influence not only the degree of commitment but also the structure of production, foreign trade, and employment distribution in the country.

Just what factors determine the percentage of income that a community will spend on the various categories of goods and services? The relative prices of goods and the level and distribution of income come to mind immediately. The influence of the age distribution of the population and that of the degree of urbanization are also generally recognized. Of particular relevance for the argument of this paper, however, are the effects of three other factors, namely, the extent of contact with other societies, the cultural background of the population, and the nature of the goods and services that are available. In today's awakening countries these last three factors are vastly different than they were in the wealthy countries before they became so wealthy. If these three factors are of real consequence, the allocation of consumption expenditures among various goods and services in the newly devel

oping areas will surely not parallel that in the industrialized countries. We must look, then, for the differences in the nature of economic development that may follow as a consequence.

The process of commitment of the labor force to industrialization is likely to give rise to a pattern of consumption that is in some measure inconsistent with industrialization. The development process may be characterized by expansion of the primary and tertiary sectors of the economy, while the growth of the manufacturing sector is retarded by, among other forces, the limited demand for locally manufactured goods as compared with services and imported goods. Public policy can be designed to alter what many would call this "unbalanced" development; but, in the absence of an appropriate public policy, manufacturing may be discouraged and tertiary production encouraged by the process of commitment more than has been generally recognized. A stunted manufacturing sector in an area with a low but rising per capita income may be not only common but readily explainable. This does not mean that in the typical case there is little or no development of manufacturing, but that relative to the rest of the economy the manufacturing sector may remain quite small simply because of the pattern of consumption expenditures.

There are countless reasons why the manufacturing sector of a developing economy grows very slowly. Among these is the famously high marginal propensity to consume, which leaves little income for capital formation. The impact of this level of aggregate consumption expenditures is well-known; but their composition quite independently of their level may also do much to discourage domestic manufacturing.

The rationale of this argument, shorn of details and of some important qualifications, can be shown in a simplified model. Suppose that the industrialization of a country begins with some raw material processing industries employing previously idle members of the society, who are drawn from both urban and rural areas. The slightly greater degree of urbanization and the slightly higher incomes lead to some imitative consumption, i.e., the living standards and consumption patterns of higher income countries are copied to some extent. This means that the developing area is consuming more durables and more services per capita than did the high income countries when their income per capita was at a comparable level. The high income countries have such a comparative advantage in the production of the durables that the developing area will choose to import them for reasons of economy as well as prestige. Services, on the other hand, must be produced at the

point of consumption, so they are produced in the developing country. Consequently its pattern of demand will lead to the production of more services and fewer manufactured goods than was the case in the presently industrialized countries.

In this process two forces are especially powerful in shaping consumption. First, the awareness of higher living standards elsewhere causes a certain amount of what has been called "imitative consumption."1 This awareness makes for a high marginal propensity to consume the demonstration effect operates across international boundaries, as suggested by Nurkse 2-and causes the low income countries to want specific goods and services. Thus imitative consumption involves more than the demonstration effect. Imitative consumption can appear without a change in income, whereas the demonstration effect, strictly defined, is limited to the effect of changes in income.

The second major force in changing consumption patterns is urbanization; it shapes consumption in two ways. Urbanization can help bring about imitative consumption since the immigrant to the city learns of the consumption standards of other countries as well as his own. But some changes in consumption would be expected even in the absence of imitative consumption, or of an increase in income, merely because urban living is a different way of life.

The effect of population growth, changes in the age distribution, and changes in the distribution of income are largely ignored in this paper. These factors certainly affect consumption expenditures, but it is more rewarding to emphasize the effect of changing preferences at the level of the individual consumer.

EXPANSION OF WANTS VIA CULTURAL CONTACT

The "theory of want development" is in an embryonic stage and enables us to say very little of a positive nature about the path that such development is likely to take as all the changes associated with economic development occur. The many case studies of acculturation and cultural change apparently have not substantially improved our ability to

1 Norman S. Buchanan and Howard S. Ellis, Approaches to Economic Development (New York: Twentieth Century Fund, 1955), p. 385.

2 Ragnar Nurkse, Problems of Capital Formation in Underdeveloped Countries (Oxford: Basil Blackwell, 1953), Chapter 3.

3 See Elizabeth E. Hoyt, "Want Development in Underdeveloped Areas,” Journal of Political Economy, 59:194–202 (June 1951). Apparently Ralph Linton would not agree. He has said that "if we know what a society's culture is we can predict

...

predict whether a want for a specific good will develop in a society. Thanks to these studies we are familiar with the proposition that a want will develop only if it is consistent with the culture of the society in question, but this is a necessary rather than a sufficient condition. The fabled difficulty of selling iceboxes to the Eskimos had been recognized long before the anthropologists became seriously interested in "culture contact." There is, however, still great uncertainty about what one can sell to the Eskimos. Most of the knowledge of want development seems to be of this negative sort, i.e., one can predict what will not be wanted more easily than what will be wanted.

Wants for specific goods and services will develop only if they have some favorable association. The African has identified the United States and the Western European nations as the economically and politically powerful countries and so wants to copy our material standard of liv ing. Thus, cultural contact between the European and the African tribesmen results in the adoption by the latter of certain aspects of European culture but not vice versa. The African frequently wins some prestige among his fellows by this transfer, but the European would lose status in his society if he were to "go native."

It is difficult to proceed beyond these broad principles to discern just what goods will and what goods will not be taken up by a group of consumers not previously exposed to them. Goods may be desired in a community either because of some simple curiosity or because they provide some specific advantage. The advantage may be nothing more than the prestige associated with ownership, or it may be a functional one. At least some items of Western clothing, for example, are adopted only for prestige reasons, while pots and pans and firearms are clearly with a fairly high degree of probability whether the bulk of its members will welcome or assist a particular innovation.”—“Cultural and Personality Factors Affecting Economic Growth," in Bert F. Hoselitz, ed., The Progress of Underdeveloped Areas (Chicago: University of Chicago Press, 1952), p. 74. But Linton seems to be in a minority. See Edward M. Bruner, “Cultural Transmission and Cultural Change," Southwestern Journal of Anthropology, 12:191 (Summer 1956); and Melville J. Herskovits, "The African Cultural Background in the Modern Scene," in C. Grove Haines, ed., Africa Today (Baltimore: Johns Hopkins University Press, 1955), p. 39.

4 See Hoyt, op. cit., pp. 195 ff.; Ralph Linton, “Acculturation and the Processes of Culture Change," in Acculturation in Seven American Indian Tribes (New York: Appleton-Century Company, 1940), pp. 466 ff.; and Herskovits, op. cit., p. 40.

5 W. A. Lewis, "The Economic Development of Africa," in Calvin W. Stillman, ed., Africa in the Modern World (Chicago: University of Chicago Press, 1955), p. 98. • Linton, “Acculturation and the Processes of Culture Change," ibid., and Hersko vits, ibid.

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