The regeneration of British industry

Book Ittrphr~rr~tatior~of Lortg Rnr~ye P~aru Through Current Operating Bdps. K. S& and R. E. SEILER,Planning Oxford, Ohio (1978), 55 pp. S5.00 (softback).

Executives

Institute,

This booklet analyses the results of an investigation of the relationship between the long range planning and budgetary processes. Dara was gathered first from those primarily responsible for the iong range plan, (470 questionnaires, 139 responses) and then from those who formulate the operating budget (350 questionnaires, 146 responses). The methodology is described and the questionnaire lay-outs are included as appendices. Sixteen analytical tables, supported by text, cover subjects such as the length of planning horizon, frequency of incorporation of plan changes into the budget, proportion of the the budget emanating from the plan, utilization of the plan, participation in and perceived usefulness of the plan. A short summary brings the main points together. Although researched in America there is a large element of home truth in these analyses, particularly those concerned with perceptions, planners and chief esecutives could usefully study them. R. H. TEAGER,Planning Beckenham

Forecastiy:

AH

Appraisalfor

Consultancy

Services,

(585)

Makers ad Planners, W. ASCHER, Press, Baltimore and London (1978),

Policy

The Johns Hopkins University 239 pp. L10.50 (hardback).

This is an important book in at least two major respects. It appraises the performance ofprofessional forecasts over a respectable period of time in penetrating clarity and, in drawing conclusions, expresses them in notably elegant English, devoid of jargon or ill-defined concepts. This means that, in spite of its slimness, the book is dense reading and cannot be tackled lightly. After a comprehensive introduction to what forecasting is about, William Ascher has brought his powers of incisive analysis to the reasons for having forecasts and their impact on policy making and its out-turn. Especially, the influence of available forecasting methods on the practices of the public decision process is reviewed with considerable effect. The fact that the sphere of reference is almost exclusively from U.S.A. does not, at least for mc, reduce the relevance of the insights unearthed. Accuracy is accuracy wherever it is. The core of Professor Ascher’s work is presented in five chapters, one each on Population, Economic, Energy, Transportation and Technoiogy Forecasting. In each chapter forecasts are analysed for their accuracy and the reasons for their lack of it. The dominant finding is that assumptions are more important than methodology. Although he would not use such a coloquialism, Professor Ascher’s finger points clearly at the influence of wishful thinking in forecasts, a failing of the most respectable of forecasters. That subsequent analysis identifies the retention of existing assumptions as the main reason for being wrong, does not detract from the accusation of wishful thinking. Now that it has been elucidated so elegantly, the examination of the fundamental assumptions on which any forecast is based-and therefore on which everv planning system relies-is clearly the most important aspect of the projection. The review of assumptions must be comprehensive for a forecast to be credible, the identified exogenous variables in a model, for example, invariably being inadequate. This raises as a major issue the reliance of credibility on the intellectual liberalism of the user of forecasts and the problems of policy makers m accommodating prejudices, which encompasses the very fundamentals of anyone looking at the future politics.

Reviews

The final chapter, Conclusion, is a most profound survey ofcontemporay forecasting problems. It proposes the phenomenom of assumption drag and segregates forecasting from policy making e.g. corporate planning should provide analyses based on a portfolio of options rather than selecting one course based on past practices in which case policy has been decided. Especially, the limitations of models in their capacity to accommodate an adequacy of changed assumptions is instanced. There seems to be a distinct trend towards preparation for a forecast by scenario writing and a preference for surprise sensitive forecasting, particularly on sociopolitical topics. There is a section of notes to the text, rather than page footnotes, and a thorough index. Those who really try to forecast, whether in a structured way or as a peripheral function, will find William Ascher’s ‘Forecasting’ an invaluable appraisal of contemporary conditions in the craft. Every professional forecaster would benefit from the humility induced by the book. For the protagonist of regimented planning procedures, it serves to demonstrate the uncertain foundations on which they base their schemes-it is a powerful justification for the strategic thinking school of planning. Finally, academics can instance this book as an examplar, for content, form and language-a literary masterpiece in its field-and in that I agree with all that Professor Harold Lasswell of Yale writes in the Foreword. W. OWEN NUTT, Warlingham,

Surrey

(597)

The Regeneratiort qf British Idusfry, J. MORRELLand J. BELLINI,The Henley Centre for Forecasting, London (1979), 231 pp. L30.00 (softback). I had no idea, when I first introduced the Jameses over lunch a few years ago, that their obvious compatibility would prove to be SO productive. Clearly, The Regeneration of British Industry maximizes their strengths and this is precisely the message carried by their first joint publication-accentuate the positive. LJnfortunately, just as ‘accentuate the positive’ has become an outmoded technique in psychiatric practice (the intellectual levels of patients has evolved somewhat since the 1930s), so will it, I suspect, fail to induce the sick patient of British industry to regenerate itself. Furthermore, I would suspect that both Morrell and Bellini would put a higher probability on an alternative scenario for U.K. survival then the conservative path of smoothness portrayed in their book. The Regeneration qf British Industry is divided into 10 chapters, one of which is written by Christopher Roxbee Fox and another by Margaret O’Brien. But it is really in three parts; how we got into this mess, what’s good in it and how to get it better. Written essentially by Morrell, the first two chapters trace the evolution of the contemporary U.K. industrial condition-in a professionally competent analysis-and then goes on to draw poorly confirmed conclusions about life-styles from the observed trends. The chapter by Roxbee Cox orientates the engineering industry in commendable detail and projects business prospects by sectors, followed by a conventional analysis of the labour force by O’Brien with demographic and skill category projections. Further analysis, with a Futures flavour, is provided in a review of the changes seen necessary by Bellini which identihes the new technologies on which future industry should be based. He continues in the next chapter with arguments to justif)r a concerted effort to change the values of society towards the benefits of high technology industry, including a revision of the education system, with a national strategy for manpower supply. This is followed by a series of regional and provincial commentaries concerned with location and industrial size

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Long Range Planning Vol. 13

which involve applied.

central

government

strategies

February 1980 being

rigorously

The final chapter jointly by Morrell and Bellini purports to be a Blueprint for Britain, but starts off by setting two main objectives for the decade of the 80s. An investment ploughback of 25 per cent of output into the new industries previously identified, and a programme to eliminate price intlation. From these stem a series of subsidiary objectives and the necessary measures to achieve them which extend from the running of pariiament to tax reform. Throughout, it is assumed that the incentive of economic growth is of sufficient value to induce the ‘regeneration’ of industry-having demonstrated the decline of this motivation for over 100 yearsand effectively ignoring the implications in the works (quoted) on a post-industrial society by Daniel Bell, W. Rostow and others. This assumption is not examined and, as a result, the book is an economists view of Britain in the future-albeit a blend of Keynsian and monetarist economic viewpoints. The book, from its title on, assumes,that industrial economic growth is capable of regeneration. The only serious argument for self-sufficiency is made for agriculture without reference to any risks in present climatic trends. There is no real assessment of the U.K. competitive strengths in world markets and certainly no attempt to be more product specific in identifying overseas sales opportunities (this is at least being attempted by some NED0 Sector Working Parttes). And these are the major, unaddressed, assumptions underlying the whole approach to regeneration of British industry, that there exist virtually limitless markets for the products of our industry, that we somehow have an inalienable right to an added value growth existence without providing the competitive intellectual content in ‘order of magnitude’ innovation. Even our really competitive industry is not in a state of absolute possession of advanced knowledge as we were at the beginning of the industrial revolution in converting coal to mechanical muscle. Now, if we had a breakthrough on direct nuclear fusion to electricity, or some comparable leap forward, there would be a case for regeneration of industry, but not on the limited fortunes of North Sea oil, as Morrell and Bellini demonstrate. But for all that. this is a thoroughly recommended book. Not just for planners, indeed, every board member ofevery British company should be forced to read it-and understand it. That alone might go a long way to regenerating something. Certainly it offers good argument for change and a wider understanding of the issues at stake. In spite of the acknowledgement for support by Rank Xerox, I think the price justifies a better production. Typewritten in A4 format it is convenient and easy to read, but not to shelve, and the punched spine binding is not prestigious. Perhaps a technology jump to resin paste binding would have been justified, even for the discount offer of k20 to Henley Centre customers (,&CO for multiple copy orders). W. OWEN NUTT, Warlingham,

Labour

Supply

in Economic

Surrey

Development:

(619)

The Future

o/ the Lay

Market Economies to the Year 2000, F. KNOX, Saxon House/Teakfield,

Famborough

(1979), 114 pp. A7.75 (hardback).

Anyone who does not argue that a faster growth in the labour supply leads to unemployment deserves to be welcomed. For the United Kingdom there are too many projections showing rising unemployment as a result of a higher growth in labour supply. Mr. Knox argues that a high growth of the labour supply is a necessary condition for economic growth. Unfortunately he limits

his evidence co six countries (U.S.A., U.K., Japan, France, West Germany and Italy) and does not provide any properly tested precise hypotheses. There is no presentation of any statistical analysis and by his own admission two of the countries, U.S.A. and West Germany, seem to provide counter evidence. West Germany’s continued high growth despite a fall in the growth of the labour supply is explained as a lagged response to earlier high growth. It is not clear whether this lagged effect is a general feature or peculiar to West Germany. Even if attention is limited to these six countries, a simple regression of growth in output per man hour on growth in the labour force does not produce a significant result (the coefficient on labour supply growth has a r statistic of 0.9). If Japan is excluded from the data, the coeficient on labour supply becomes negative, although still insignificant. This point, raised in R. E. Rowthom’s What Became of Kalder’s Law? (Economic journal, March 1975, No. 337, pp. lO-lY), is referred to in a footnote as ‘subsequent discussion’. He dismisses work by S. Gomulka (Inventive Activity Di%;ision and the Sfnter oj_Economic Growth, University of Aarhus, 1971) because the theory was tested using a sample of 39 countries that included a variety of different economies. If Mr. Knox’s model can only be generalized to four countries (if that) it can hardly claim to have much explanatory power. The projections of the labour supply to the year 2000 are based on population projections prepared in 1973. The translation into labour supply projections is not very detailed and anyone seeking such data would be advised to obtam figures based on more up-to-date population projections. DAVID STANTON,Head of Unit for Manpower

Department

of Employment,

Studies,

(571)

London

Va[rre Added, B. COX, Heinemann A6.50 (hardback).

ICMA, London (1979), 220 pp.

Despite recent powerful support, by seminar and conference, from such august bodies -as BIM and IMS-and despite too, the publication separately of a few very excellent books and articles-on the usefulness of the Added Value concept, it is still true to say that few managing directors or their advisers appear to have knowledge of this potent and topical aid. Until the appearance last year of Professor Michael Morley’s outstanding exposition ‘The Value Added Statement’ I had attributed this sad state of affairs to an innate and unimaginative langour amongst the accountancy profession, coupled perhaps with an understandable suspicion of the activities of some management consultants anxious to stimulate productivity by fair means or foul. But then came Morley’s book and for excellent good measure E. G. Wood, .4&d value-rhe &sy ro Prosperity (which I had the privilege to review in the August 1979 issue of Lony Range Idanniry). NOW Bernard Cox has given us his 210 page ‘Value Added, an appreciation for the Accountant concerned with Industrv’, plus an excellent reading list, and generously indexed, published with all the authority of the Institute of Cost and Management Accountants. Fasten your seat belts, gentlemen, surely we are now on our way. Cox shows us how Added Value is created at various levels, can be measured for a wide range of activities, can be wisely or unwisely dissipated; how it gives a fresh view and method of control to management, how it relates to national income, permits meaningful comparisons between firms, industries and nations, can be dangerous in the wrong hands, and in the right ones can provide an excellent basis for public relation purposes, and as a framework for reward systems. Between the three books cited above, though covering the same broad ground, there is remarkably little overlapping and a remarkable ability to view the same mountain from quite different