A Note on the So-Called Degree of Capital-Intensity of Investment in Under-Developed Countries 1 [1954]

Investment in agriculture and light industry is to be preferred to investment in heavy industry; relatively primitive technical methods should be preferred initially to highly mechanised forms of production which use relatively much fixed capital and relatively little labour. In common-sense terms what the amounts to is that a country with a surplus of labour, instead of having less capital-intensive forms of investment, will have a proportionately larger capital goods industry than will other countries. In actual practice most underdeveloped countries will rely to some extent, in the early stages at least, on importing capital goods from abroad. During the intervening years between the finishing-date of the simpler and quicker-to-make type and the finishing-date of the more complex and slower-to-make type, corn-output and corn-surplus will be higher if investment takes the less capital-intensive form. The one form of investment has a once-for-all effect, the other a continuing effect on the level of income and consumption.