Bouguern Rima : group 1

Patterns of Planning
Since the end of Second World War most countries of Asia, Africa and Latin America have
published one or more ‘Development Plans’. These Plans differ so much in structure and content that
the title ‘Development Plan’ no longer conveys a meaning. The first task is therefore to sort out the
characteristics of development planning.
A Development Plan may contain any or all of the following parts:
(i) a survey of current economic conditions;
(ii) (ii) a list of proposed public expenditures;
(iii) (iii) a discussion of likely developments in the private sector;
(iv) (iv) a macroeconomic projection of the economy.
(v) (v) a review of government policies.

Economic Survey
The Plan normally begins by reviewing progress in recent years, especially since the last Plan
was issued. Changes are noted in population, national output, investment, saving,
consumption, Government expenditure, taxation, the balance of payments, and the
performance of each of the major industries. Giving this information is not one of the
purposes of the Plan; many governments produce some kind of Annual Economic Survey
with this material, and many also produce Plan Evaluations from time to time, which examine
the progress of the economy in various spheres, in the light of proposals in the Plan. In the
Development Plan document such information is merely a curtain raiser, suggesting the
problems which must be selected for further attention.
Government Expenditure
When the first Development Plans were issued at the end of the war, the emphasis was on
determining priorities in the public sector. A review of public expenditure is still an essential
part of any Plan. The first move in preparing a Plan is normally to ask each Government
department or agency to submit its proposals for expenditure over the period of the Plan.
Most of the routine work on the Plan consists of costing each proposal as carefully as
possible, and estimating potential benefits, financial and otherwise. The total of the sums
requested always greatly exceeds the money the Government is likely to have; hence the
prime object of this part of the Plan is to assign priorities, deciding what is to be included, and
what shall be postponed or rejected. Hardly anybody doubts the value of this kind of periodic
reassessment of what Government departments are planning to do, even though it is realized
that modifications have to be made in between Plans. It is very easy for Government agencies,
like any other institutions, to drift from day to day. The periodic call to look ahead, and to
make and defend proposals before the planning authorities, in competition with the proposals
of other agencies, helps departments to keep their sense of direction.
Private Sector Targets
The passage from planning the public sector to reviewing the private sector was made at an
early stage. It was inevitable, partly because these sectors are inter-related, but still more
because the rate of economic development depends more on what happens in the private
sector than it does on expenditures in the public sector.
 Most Development Plans contain chapters reviewing each of the major industries, analysing
their prospects and their difficulties, and formulating programmes for increased output or
sales. Special attention is given to promoting new industries which are thought to have good
prospects, having regard to current estimates of markets and resources. Some of these reviews
include specific targets in quantitative terms (e.g. investment, employment or output).
Sometimes these quantitative targets are used for making policy decisions; more often
they are not. A statement that the output of a particular industry is expected to increase by 45
per cent during the next five years may have no significance whatsoever; or may serve merely
as propaganda, intended to encourage producers in that industry to redouble their efforts. If
the figure becomes the basis of policies, such as import controls, or building licences, or
subsidies, it then becomes important to know how the target of 45 per cent was chosen. Most
such figures are taken out of the air, but some more solid method becomes essential if the
figures are to determine policy. To prepare a reasonable set of private sector targets for a
Development Plan involves a great deal of work. Markets and costs must be analysed with the
same accounting and statistical techniques that private firms use for this purpose; and, in
addition, adjustments must be made wherever the gain or loss to the economy as a whole is
thought to be greater or less than that which accrues to private firms. This must be done for
each industry separately; and then a check has to be made to ensure that the predictions for
each industry are consistent with each other and with what is predicted for the economy as a
whole. Each industry buys from some other industries at home, and also buys some imports; it
sells to other industries, to consumers and perhaps to exporters. It generates savings, pays
taxes, and absorbs investment. The sum of the output predicted for each industry must equal
what is predicted for total output; so also with investment in each industry, consumption of its
product, exports, and so on. The only way to test the consistency of targets is to make a set of
interlocking tables for each industry and for the economy as a whole. This is done by
projecting national income, using standard national income and input-output procedures.
Exercises of this kind have gained rapidly in popularity among professional planners,
mainly because macroeconomic planning provides a consistent framework for all the
quantitative aspects of the Plan. In extreme cases the shape of the Plan is completely
transformed. We are told in detail how much each industry will produce, import, export and
invest; but there is no list of Government projects, and no indication of the policies which
might bring the predicted results.
This evolution of planning concepts, from listing public expenditures, through reviewing
industrial and agricultural policies, to making macroeconomic models, has not been
unaccompanied by controversy. For one thing these different kinds of planning are done by
different kinds of persons, each proud of his own methods, and somewhat contemptuous of
the others’. A plan for public expenditure is best made by a man with Treasury experience,
who is used to dealing with Government departments, and knows their tricks. A Plan centred
on public policy is best made by a ‘practical’ economist, who knows the kinds of problems
that emerge in developing economies, the various solutions which have been tried in various
places, and the extent of their failures and successes. A Plan consisting of interdependent
tables needs an econometrician, who can invent figures when they do not exist, make
interdependent models, and solve any number of simultaneous equations. As these three types
of men have jostled one another, they have snarled at each other, and made hostile remarks
about each others’ work. Here is an example from an august source: the Report to the
President of the United States from the Committee to Strengthen the Security of the Free
World (known as the Clay Report) on The Scope and Distribution of United States Military
and Economic Assistance Programmes: There is a difference between sound national
budgeting in economic and social terms on the one hand and theoretical long-term national
development planning as it is often encountered. Extrapolations of mathematical models
based on questionable statistics for debatable base periods seem to have a way of going
wrong, even when it is possible to find economists who agree with each other. Furthermore
these long-term projections have been of little or doubtful value and frequently have proved
harmful by directing attention to the theory of economic development at the expense of its
practical implementation. Sound governmental planning consists of establishing intelligent
priorities for the public investment programme and formulating a sensible and 1 See Chapter
III, section 5 below.
consistent set of public policies to encourage growth in the private sector (p. 16).

Macroeconomic Planning
The principal danger of a macroeconomic exercise lies in its propensity to dazzle. The more
figures there are in a Plan, produced by an army of professionals who have laboured mightily
to make them consistent, the more persuasive the Plan becomes. Attention shifts from policy
to arithmetic. Consistency can be mistaken for truth. Revision is resisted. Yet the Plan is not
necessarily right merely because its figures are mutually consistent. However, this is a
psychological rather than an intellectual danger. Once the point is grasped that mathematical
exercises do not of themselves produce truth, a Plan with figures is no more dangerous than a
Plan without figures. The question remains: what useful purpose is served by producing
doubtful target figures for the private sector? The answer turns on a number of factors,
especially on the degree of interrelationship between private and public sectors, on the
amount of control exercised over the private sector, on the persuasiveness of the planning
process, and on the availability of reliable statistics. That the public and private sectors are
interrelated cannot be doubted, but it does not follow that one must make a mathematical
model of the whole economy. Each public agency must take account of private plans when
making its own. The Electricity Department must consult all potential major uses of power, in
order to forecast demand. The Water Department must try to find out where new industries
are to be located. Transport and other communications must also be integrated with the
private sector, and so on, all along the line. This calls for much consultation with the private
sector, but to include the results of this consultation in the plans of the public sector is
relatively simple. Large-scale investors in the private sector have to meet the same problem
every day; they have to know, or guess, how others will behave, in both the private and the
public sectors. In small countries where all the chief decision makers know each other, and
consultation is easily arranged, co-ordination can be achieved without elaborate models. In
larger countries, like Britain or France or the United States, this argument for models is much
stronger. Public and private sectors are also interrelated in that the total size of the public
sector programme must depend on what the private economy can bear.

Development planning / Routledge Library Editions—Economics DEVELOPMENT