Let us make an in-depth study of the meaning, characteristics, features, explanation and critical appraisal of technological dualism.
Meaning of Technological Dualism:
Prof. B. Higgins explains the theory of technological dualism with the co-existence of traditional sector using traditional technology and modern sector using modern technology in less underdeveloped countries.
In this context, dualism is “a situation in which productive employment opportunities are limited not because of lack of demand, but because of resource and technological restraints in two sectors.”
An underdeveloped country is characterized by such dualism as it provides a lot of unemployment and under employment. The resource endowments and differences in production functions in two sectors forms the basis of technological dualism which results in an inadequate number of openings for productive employment.
Prof. Higgins is of the opinion that different Resource Endowment and Production Function across the traditional and modern sectors of the less developed economies is the fundamental basis of technological dualism in these economies.
Characteristics of Dual Sector:
The traditional rural sector has following main features:
1. It is engaged in peasant agriculture, handicrafts or very small industries.
2. Products can be produced with wide range of technologies and wide range of combinations of labour and capital. Thus, the sector will have variable technical coefficient of production.
3. The factor endowment in this sector is such that labour is relatively abundant factor and techniques are labour intensive.
Features of Modern Sector:
1. This sector includes industries, plantation, transport and related activities as its principal occupations.
2. There is a limited scope of Technical substitutability of factors of production. Accordingly, technical co-efficient of production remains generally fixed.
3. Compared to labour, more of capital is utilized. Thus the process of production is dominated by the capital intensive technique of production.
4. Besides labour and financial-capital, developed land also constitutes a major resource of production in this sector. This sector caters to the domestic needs of the consumers as well as producers goods for exports.
Explanation of Technical Dualism:
There are two fundamental basis of technical dualism, according to Prof. Higgins:
1. Differences in Factor-Endowment:
Difference in the availability of capital and labour is one of the two fundamental basis of technical dualism. The traditional sector of the dual economies is generally characterised by the abundance of labour but chronic shortage of capital.
So, production techniques are often labour intensive in the sector. In contrast, in the modern sector, more of capital compared to labour is generally employed. Thus almost two distinct techniques of production are found to exist across two different sectors of the dual economies.
2. Difference in Production Function:
Difference in production function is second fundamental basis of technical dualism. While there are fixed coefficients of production function in the modern sector, these are often variable in the traditional sector. Higgins analyses this duality in the context of “Factor proportions”.
Eckaus offered a detailed explanation of this feature of less developed countries. Higgins used this concept in this descriptive analysis of problem of unemployment in less developed countries.
Technological dualism suggests that the existence of vast unemployment in less developed economies is not due to the lack of effective demand but owing to the ‘resource’ constraint as well as technological backwardness.
As regards resource- utilization, the less developed countries have severe structural imbalances:
(1) One finds different co-efficient of the same factor in its alternative usage,
(2) the price structure is not compatible with resource supply.
Thus, Prof. Eckaus is of the opinion that the problem of unemployment is generated owing to :
(1) incompleteness of price management and
(2) Surplus of labour owing to the technical as well as demand constraints.
Prof. Higgins explained with the help of figure 1 below the existence of unemployment in underdeveloped dual economies.
The Fig. 1 is based on the following assumptions:
(1) There are two sectors of the economy:
(a) Traditional sector
(b) Modern sector
(2) There are two factors of production:
(3) Two Commodities are Produced:
In this diagram 1 units of capital (K) are measured on vertical axis and units of labour (L) on the horizontal axis. The points a, b, c denote the fixed combinations of factors i.e., capital and labour (K & L). The curve q1, is an isoquant representing a certain level of output, as drawn, the output q1 can be produced only with the unique combination of factors at point a. The curves q1 q2q3 and q4 etc. represent different levels of output increasing along the expansion line OE.
The output can be increased only by increasing the use of K and L in constant proportions given by slope of OE. The dotted curves represent the case of ‘fixed technical coefficient’. The line OE represents the expansion path of this sector and its slope is constant, relatively capital intensive factor ratio.
When capital and labour are actually available in proportions equal to fixed capital-labour ratio, it is possible that both factors are simultaneously fully utilized. If the actual factor endowment is to the right of the OE say at point F i.e. there must be some unemployment of labour in this sector. To produce an output of q1 the sector will, use OK1 units of capital and OL1units of labour.
If OL2 units are available, the excess labour supply has no effect on production techniques and L1L2 units of labour will remain unemployed or will find to seek employment in the traditional sector. Therefore, it is only when capital increases over time and more labour will be employed with the result of expansion of output.
According to Higgins unemployed labour in the industrial sector is left with no option other than seeking employment in the rural sector of the economy. Technical coefficient of production can be changed in the rural areas facilitating the absorption of labour with still greater application of the labour intensive technique of production.
But this reduces the marginal productivity of labour even to the zero level causing the problem of disguised unemployment in the rural areas of less developed countries.
From the above discussion, we can conclude that the existence of technological dualism tends to increase unemployment and disguised unemployment in underdeveloped countries.
The expansion of industrial sector mostly takes place with the help of foreign capital; industrialization leads to mush faster growth of population as compared with the rate of accumulation of capital which is the major cause of growing unemployment in these countries.
The theory of technological dualism definitely is an improvement over Boeke’s social dualism. It is realistic as it focuses now disguised unemployment gradually arises in the dualistic economies. Despite the fact, its relevancy in the contemporary world can be challenged.
In this regard, Prof. G. Meier has expressed his doubts saying, “Has the production in the advanced sector actually being carried on with fixed coefficients? Even if an advanced, capital intensive processes were initially imported, was there subsequently no adoption to the abundant labour supply? Was technical progress actually labour saving in advanced sector?” These are the crucial questions which call for empirical investigation.
As such the theory is criticised on the following grounds:
1. Coefficients not Fixed in Industrial Sector:
This theory assumes that the production in industrial sector is carried on with fixed proportions between labour and capital, but this assumption is not valid and possibility of substitution of one factor by another cannot be ruled out.
Modern age is a dynamic age and the notion of fixed coefficients appears to be unconvincing. Everything is likely to undergo a change and nothing remains constant. Hence, the assumption of fixed coefficients is untenable.
2. Factor Prices do not Depend on Factor Endowment:
This theory successfully explains how the factor endowment and differences in production function have resulted in creating disguised employment in traditional sector. This is related to the pattern of factor prices. But factor prices do not depend on factor endowments completely.
3. Neglects Institutional Factors:
Another drawback of the theory is that Higgins neglects the institutional and psychological factors which greatly influence factor proportions. It is not the technological factors alone that affect labour capital ratio but the sociological factors also exercise their influence on it.
4. Neglects the Use of Labour Absorbing Techniques:
This theory indicates that capital intensive techniques are used in industrial sector while such techniques are generally labour saving. (All imported techniques are not labour saving.) For example, Japanese agricultural development cannot be attributed to use of capital intensive technique.
But it was the result of the application of better seeds, manure, improved methods of cultivation, increasing use of fertilisers etc. Thus, Higgins neglects the possibility of such developments in a dualistic society.
5. Concept of Disguised Employment is Ambiguous:
Prof. G.E. Meier maintains the opinion that the concept of disguised employment has not been properly discussed in Higgins theory. Further, he suggests that, “greater clarity is needed on the nature of unemployment and underemployment in traditional sector.” Similarly, he fails to assess the extent of excess labour supply in industrial sector. In this way, technological dualism seems to be ambiguous.
Since Higgin’s theory of technological dualism suffers from various drawbacks, yet it clearly explains the reason for the appearance of disguised unemployment in underdeveloped countries. It appears to be more realistic in saying that technological dualism is the real cause of structural and technological unemployment in Dualistic Economies. In this regard, this theory is superior to the theory of Prof. Boeke’s social dualism.