Economics of inefficiency: Growth with learning

We live the day thinking about growth and additional action to stimulate more growth. We appear to be in no hurry to analyse what we are doing or what we have done with a view of learning and bringing in more efficient and effective ways of doing things.

Absence of such a thought and action process can be debilitating in the long run as growth may mean even more wastage and after a while simply the wastage and the sheer inefficiency will knock the system off the rail. We may be seeing that globally too as we have been slaves to an internal combustion engine driven system which is inherently is more inefficient than efficient!

In fact usually about 60% of the energy input is wasted and there is no way to improve on this other than changing the engine to a different type which in 21st century we may be doing our best to achieve. Understand this and you will understand the importance of having efficient systems as systems grow and the importance of having all sub processes within the system as efficient as possible.

When one makes a mistake that is not significant but with billions doing the same thing, the additive effect is so powerful and if the impacts are quite negative, then the cumulative effect is going to be extremely serious. Now that is why we are quite alarmed by the global warming effect that is enveloping our blue planet.

The carbon dioxide from emissions which is the primary culprit in this issue is as a result of poor efficiency of power generating systems which need much more inputs to satisfy our growing and expensive needs. Just think about a system with 60% efficiency – of course one will not find a system with 100% efficiency which means there will always be a price to pay for our needs – and one can imagine the shift change that is possible. Remember such developments too come when we think and act.

Lessons for Sri Lanka

There are many lessons from which we can learn as Sri Lankans as we ourselves try to get the economy to grow on exponential growth curves or super linear, whatever the terminology may be. If we wait to learn from our own mistakes, that is not doing justice to the fact that we carry brains inside our heads, especially with so much knowledge around.

This brings to mind the email that circulates with a story to insinuate that we Sri Lankans use our brains much less, thus giving an added value to it once the lifetime is over for the owner! The brain has a much higher end-of-life value due to its lack of use as per the wisdom embedded in the email when it comes from a Sri Lankan!

That may be looking at us in a self-denigrating manner but it carries a powerful message. Use the grey matter well and transformations are possible. After all we know that it is through sheer thinking and action that transformations have come about. Both good and bad is possible, of course, however here we address the aspect of non-use.

The internal combustion engine was as a result of thinking and more thinking about the results that we see today is spurring us to go for the fuel cell which will give us that 60% at best. If we relax and let things go by then we are no longer masters of our destiny but mere passengers on a boat. Many still appear to find a way forward via boats than through the use of grey matter which is hardly reassuring when we desperately look for human capital and with an ageing population each passing day we appear to be getting less ready for the future.

Inefficient systems and procedures

Within our organisational structures we can witness multiple actions and systems causing delays and achieving quite less. Meetings and minutes take hours and we discuss what we have discussed many a times before. Some may say nay to these perhaps due to powers within but the majority is stuck with inefficient systems and procedures.

Some procedures have calcified to such an extent that many may not even see the sheer inefficiency of the existing framework. It is useful at times to place time taken against each sub task to ascertain the overall time taken to realise the intended output. You may find that you can achieve precious little afterwards. However the target setting is minus such planning and the impossible is requested. Marry the two and eliminate bottlenecks an important aspect that our system needs badly.

Eliminating multiple steps is not creating opportunities for swindlers and allowing corruption to blossom. One may find it is actually the reverse that had led to such rampant corruption. At times it appears that within organisations what we are doing is spending time and energy to ensure that the audit is pleased with your work. We simply forget that the audit audits with procedures set in place and their interpretation and rightly so is when the due process is avoided or short circuited, that results in serious breakdown of internal discipline or corruption.

Examine procedures and processes

I think many examples abound to support this statement. The answer is to examine procedures and processes and at this stage some serious process reengineering is in order a process which the developed world did many years back – creative destruction as Joseph Schumpeter may remind us.

A simple example from a research organisation’s perspective is getting any amount of a chemical to the researcher in Sri Lanka can be a six-month exercise whereas in a comparable institute in the developed world your requirement will be with you within one working day – maximum! Now extrapolate such delays into your work process and you can imagine that what we are paying for in most cases is to push papers around and not for any meaningful output. A whole day’s work may mean preparing a file to support the audit process!

These procedures have shackled the community and one can see why sometimes boats indeed do offer some solace. It is instructive that the battle against red tape has to be a continuous affair as shown by the initiative in UK by the cabinet office – the Red Tape challenge. An initiative to emulate in an open manner as we must remove our inefficiencies for our own sake as otherwise we are just shooting at our own possible progress.

Japan

It is indeed interesting to note what the Japanese did when in 1973 oil price hike delivered to their economy a significant blow. In these aspects of energy resources and their availability our economy is similar to the Japanese. Having had to import all their energy resources, the Japanese switched to gain efficiency in whatever they do and achieve a unique selling point in the process too.

They switched from high energy intensive industries to industries that consume less. They improved and innovated all appliances to be frontrunners when it comes to performance efficiency and utilised them within while capturing external markets. The Japanese frontrunner program benchmarked their products with the best outside and challenged to beat the best. It is quite instructive to see their speakers presenting figures for their economic efficiency from a point of view of growth and consumption.

The Japanese economy has shown consistent improvements in energy consumed to GDP ratio. They worked to get more out of the electricity and have ratios less than one giving more GDP out of less electricity. Ours is less out of more even as we write this and that had been the way all along. Politics may have been different and many a Japanese prime minister may have gone home but the nation stuck to fundamentals of efficiency and quality and the dividends of such intense efforts are visible for everyone to see.

We just ignore efficiency if we have the ability to pay, not really understanding that this ability is quite elusive though one may not really understand that within one’s working life. That is why it is a shame to observe many incandescent bulbs in places and to see the air conditioners running as if to acclimatise their occupants to the visit to North Pole the week after.

Time to change

The drag on economic progress due to inefficiencies is significant and this is important to understand when we are facing multiple crises in the economic front. We may start with benchmarking and rally like the Japanese on a front runner program.

We must sharpen our efforts similar in a way to Red Tape challenge, perhaps with extra speed. Discipline and thinking from all quarters is called for and sincerity to the efficiency cause is a must. We have used the word productivity but had not addressed issues strongly enough. It is time to change and to change for gain by exhausting our brains for our own good.

(The writer is Professor of Chemical and Process Engineering at the University of Moratuwa, Sri Lanka. With an initial BSc Chemical engineering Honours degree from Moratuwa, he proceeded to the University of Cambridge for his PhD. He is also the Director of UOM-Cargills Food Process Development Incubator at University of Moratuwa. He can be reached via email on [email protected].)