A UNITED NATIONS publication of a few years ago referred to the conflicting views of several UN experts about the advisability of using old or reconditioned machinery in underdeveloped countries. One expert in a Far Eastern country, a specialist in the production of ramie, proposed that secondhand decorticating machinery be used in a plant producing ramie fiber. “While the [reconditioned] machines will not be as efficient as new models,” he pointed out, “first quality fiber can be produced with them. It is obviously important that every possible economy be practiced in order to conserve foreign currency funds.” In contrast, another expert advised against a proposal to install reconditioned textile machinery in a Middle Eastern country because “old machinery or even the best reconditioned machinery will produce only inferior goods.” He saw “no reason why the country should be handicapped with worn-out theories or machinery which would only hamper its strides toward improvement….”
Mr. Waterston is a staff member of the Development Advisory Service of the International Bank for Reconstruction and Development. He has been associated with the Bank for 17 years. He is coauthor of The Economic Development of Mexico, and author of Planning in Morocco, Planning in Yugoslavia, and Planning in Pakistan, all published by The Johns Hopkins Press, Baltimore, Maryland.
Similarly divergent opinions are also found outside the United Nations. There are, indeed, two widely separate schools of thought on the subject. Advocates of greater use of secondhand equipment in developing countries contend that not only do firms using such machinery do well in the domestic market, but, because of low wages, they may be able to compete in export markets with companies in high-wage areas which operate with more modern machinery. In Calcutta, for instance, an old private firm, affiliated with a larger British concern, bought from its British associate a used semiautomatic machine for making wood screws. Paying wages at the low rates prevalent in India, it not only undersells the British company in India, but also exports to neighboring countries at a lower price than its associate. An even more striking example is that of a foundry in Cleveland, Ohio, that shipped some of its old casting equipment (which in the United States required uneconomic amounts of high-cost labor to operate) to South America, where it was used to establish a foundry. Although steel for casting also had to be shipped from the United States, the company found that the South American castings could be delivered to Cleveland (a round trip distance of 7,000 miles, including 700 miles of inland transport) at a lower cost than that of producing similar castings with modern equipment in its Cleveland plant.
Nevertheless most entrepreneurs prefer new equipment if they can get it. There are several reasons for this. There is the widespread view, by no means limited to the developing countries, that what is new is inherently better than what is old. This is not necessarily so, as everyone knows. Nevertheless, like some financing agencies, operators of plants in underdeveloped countries do not wish to add to their burdens unnecessarily by using secondhand machinery, even if they know where to get it; and it is not always easy to locate the right type of usable secondhand equipment when it is needed. Furthermore, while a plant may be found where used equipment is pointed out to visitors, most operators take much greater pride in managing factories with the most up-to-date production facilities. Indeed, in some developing countries, there is so strong an aversion to the use of anything but new machinery that entrepreneurs have been known to settle for lower financial returns in order to enjoy the psychological satisfaction derived from ownership of the latest equipment.
Again, anyone who advises a developing country to acquire used machinery runs the risk that his motives will be suspect, and that he may be accused of wanting to saddle a country with the castoff equipment which another country wishes to scrap. If anything goes wrong in a factory which has installed secondhand machinery, the blame may be placed on the used equipment instead of on possible mismanagement or on other causes unrelated to the used machinery.