Engineering: Production and Economic Growth

Production engineering as a philosophy, a theory, and a practical technique for organizing industrial processes to optimize output and minimize waste resulted from two sources. One was the rational spirit of the eighteenth century Enlightenment, which encouraged the organization of all activities according to scientific principles.

This was reinforced by a metaphysical belief that replicating in industry the rational order observed in the physical universe would reduce waste and lessen injustice to the work force. This faith encouraged several of the pioneers of management theory, including Frederick W. Taylor, F.B. Gilbreth, and the ‘‘technocrats’’ (see below). The other chief source of production engineering was the recurrent need from the 1850s to the present to reduce waste in the primary energy industries, and to ensure that raw materials were not being squandered.

The several periods of great anxiety over fuel resources (1860s, 1890s, 1920s, 1930s, and 1970s) together with the need to organize entire nations to meet the demands of global warfare stimulated the growth of comprehensive theories of how best to manage resources, industrial production, and product distribution.

The British engineer Armstrong, and the philosopher-scientist W.S. Jevons were among the first to attempt large scale reviews of energy resources, fuel consumption, and the economic consequences of production, with some attempt to foresee the consequences for future ages. Jevons great work The Coal Question contained most of the concepts employed by much later reviews of energy and materials use on a nationwide scale.

Many pioneers of rational methods in industry were closely connected with energy use, productivity, and the physical sciences, including Louis Le Chatelier (railway mechanics; physical chemistry) and Wilhelm Ostwald (chemistry, thermodynamics). In 1887, Ostwald introduced a general philosophy in which energy was a basic concept underlying natural and industrial phenomena. Called ‘‘energism’’ or ‘‘energetics,’’ this philosophy anticipated some of the later ideas of Taylor, Frederick Soddy, and the technocracy movement and proposed reforming orthodox economics to make energy rather than monetary value the basic unit for measuring production.

Ostwald organized an international movement called ‘‘The Bridge’’ to encourage energy efficiency in all activities, with the rational spirit of science as the guiding ideal. Efficient energy use, management, and organization were advocated throughout industry, but the movement was destroyed by the onset of World War I (1914-1918).

The waste of human and material resources by nineteenth century capitalism and the destructiveness of the Great War gave widespread publicity to the writings of Thorstein Veblen who contrasted the rational, creative methods and progressive values of the engineer with the irrational, destructive methods, and commercial values of the parasitic financier, lawyer, and politician.

Disciples of Veblen seized on the work being done by Taylor, Gilbreth, and H.L. Gantt as providing models not only for factories producing material goods but also for a just society that would eliminate the waste of human skills and potential. The most eager disciples of applying rational methods and scientific management on a national or global scale were the advocates of technocracy (‘‘technocrats’’) in the U.S. who exerted considerable influence between 1920 and 1940.

Technocracy became a political movement, with a radical agenda for social reform and reorganization of the nation along production engineering lines. The movement even had a uniform code of dress and attracted more nonengineers than engineers, although its chief exponents included the engineers H. Scott, W. Rautenstrauch, and H. Gantt. American technocrats were inclined to isolationist nationalism, but others were more internationally minded and socialist. In Great Britain, Soddy and H. G. Wells were outstanding in publicizing technocratic values.

The increased use of rational methods throughout industry and business, coupled with the mass production techniques and standardization of the American motor car industry, publicized the advantages of American methods between 1890 and 1920. The terms ‘‘Taylorism’’ and ‘‘Fordism’’ (for the systems developed by Henry Ford) were loosely used to identify a philosophy for organizing engineering-based industries that drew on scientific management, work study, time and motion analysis, standardization, increased mechanization, and mass production.

The techniques were condemned by conservatives as inhuman and destructive of the craft tradition in industry, though they were recognized as essential for introducing an era of high consumption and increasing productivity that would trigger an endless age of continuous economic expansion. This was done in the U.S., the first nation to make the transition from a mature industrial economy to a high-productivity, high- consumption economy circa 1920. In the U.S., the transition was made relatively rapidly, but in Great Britain, which reached maturity in the 1850s, the change to a high-consumption economy was delayed until the 1950s due to technological conservatism.

W. W. Rostow has analyzed this progression. British engineers were slow to recognize the import of Taylor’s work in production engineering, and after a visit to London he described them as fixated on the form of equipment to the detriment of understanding general production theory. The Americans were quick to recognize rational management of industry as an essential part of engineering education, as were industrialized nations elsewhere such as Germany, France, and Japan; but Great Britain proved backward in this respect.

There has always been a conflict between engineers’ values and economists’ values. The values of the economist were generally taken to include those of the financier, lawyer, politician, and entrepreneur. The engineer visionaries, who stressed the rational, scientific nature of engineering, were a minority who exercised considerable influence through production engineering and the Technocrat movement. They received support and sympathy from a greater number of engineers who argued that shortsighted, selfish, financial considerations were delaying or even halting technological progress. Rationally planned, scientific mechanisms (which might be an industry or a new system of transport) had to be fitted into a much broader socioeconomic ‘‘receiving system’’ whose structure and activities were controlled by irrational pursuers of personal wealth.

Exploitation of resources, including human, stopped the engineers from constructing a creative and liberating society, which would be better in the moral sense. Building on a philosophical foundation laid down in the Enlightenment, the general body of technocrats, as distinct from the political movement of that name, argued that engineering values promised better solutions to national and global problems than orthodox economics.

They argued that conventional ways of assessing wealth and economic progress were irrational and inaccurate. The established engineering professions distanced themselves from this stance, which received stronger support from journalists, writers, teachers, and academics. In Britain, H.G. Wells advocated values similar to those of the technocrats, and leading engineers did support the movement, but as individuals rather than representatives of the profession. Engineers such as J.B. Henderson and A. Ewing reminded the profession that the engineer was no mere servant of money and politics but had a responsibility to a higher enlightenment.

Engineers should accept responsibility for their work and the uses that others made of it. The present-day use of the term technocrat is the opposite of what was originally intended.

Production engineering was much more than production of manufactured articles with minimum waste of time, material, and energy so that better use could be made of existing plant and workforce. The need to include a widespread system of production in the analysis led to improved methods of management of personnel, training, transport of materials, and organization of subsidiary activities.

The analysis passed from assessing the contribution made by a particular process and measuring the efficiency of this process within a workshop or industrial site to a general review of industrial performance and efficiency within the national or global economy. This meant finding some means of quantifying the contribution made by engineering to the economy, and relating this to a more general index of economic performance.

Technocracy in its various guises stressed the scientific nature of its activities, hence measurement was essential. For many centuries, the French Wheat Price Index served as a rough guide to the fortunes of the economy of France. When the French economy achieved global significance, this index provided a general indicator. The French Wheat Price Index was chosen because there were records going back to the twelfth century. Later, the Coal Price Index served the same purpose.

Attempts were made to analyze these records, using Fourier analysis, to see if the component waves could be correlated with events and so reveal what caused the fluctuations in the economy—weather, warfare, political upheaval, innovation, or discoveries. It was argued that if trend curves persist, such analysis might suggest what should be done to meet future requirements. This positivist approach, with its dangers of determinism and historicism, was used by C.O. Liljegren in 1920 to help decide future policy in marine propulsion.

It gave rise to an increasingly ambitious attempt to make technological forecasting a reliable enough aid to design and planning. Two indices emerged as useful to both engineers and economists: Gross National (and Domestic) Product (GNP and GDP) and its per capita expression; and electricity consumption, usually expressed as total kilowatt hours (kWh) per year and kWh per capita. The ratio between these two indices was also judged important.

After 1920, the electricity generated by an industrialized nation was used to assess its rank as a modern state. The quantity of primary fuels used to generate this power was a measure of the efficiency of national industry. The amount of primary energy and the quantity of electricity required to generate the GNP of a nation per year was seen as an indicator of national technological and economic standing. For example, F. Quigley’s study published in 1920 suggested that Britain was underelectrified and might suffer in consequence.

This analysis, much developed and refined, enjoyed widespread use during periods of energy crisis, and it remains in general use.

After 1920, Taylorism, Fordism, and technocracy came together to create an engineering-based approach to global production, resource use, and economics. This intensified the clash with orthodox economics, politics, and finance, and widened the gap between the Technocrats and the majority of conservative, professional engineers who feared involvement in radical politics.

The Depression that began in the U.S. in 1929 and spread worldwide provided the technocrats with an opportunity and, in North America, gave the Technocrat movement its most influential period. In the USSR, Germany, Italy, Japan, and other industrial countries dominated by totalitarian regimes, technocracy came to mean the use of engineering to serve a military dictatorship with maximum efficiency and minimum considerations of conscience.

As a result, the word technocrat came to mean an obedient expert who discharged assigned duties with technical competence in the service of the powerful; it has never recovered its original meaning. In the 1930s the original ideals of technocracy were pursued largely in North America and Great Britain. The technocrats in the U.S., despite being isolationist and nationalist, were the most influential inside and outside North America.

The technocrats argued that the failure of the financial system in a country full of skilled workers, competent engineers, and up-to-date factories was proof that the old economics should be scrapped. The U.S. workforce wanted to work. The equipment was there. The energy was there. The engineering intelligence was there. But the financial system could not facilitate turning these resources into productive activity.

Leading technocrats such as H. Scott were inspired by H.G. Wells and F. Soddy and advocated making energy units the basic currency in a new economics. Echoing Ostwald, Soddy and others, Scott said that all goods and services were converted energy, and a scientific review of a nation’s activities meant quantifying all human, natural, and machine activities in energy units, which could then be used as the price of goods and services.

The matter of thermodynamic energy grade seems to have been sidestepped. Between 1932 and 1933, Scott, Rautenstrauch, and Hubbert compiled an energy survey of North America which gave widespread currency to many of the techniques, concepts, and terminology still found in energy analysis. Hubbert’s contribution was outstanding. The survey charted the growth of 3000 industrial and agricultural products between 1830 and 1930 and measured production in terms of energy expended, volume of production, rate of growth, manpower per unit of production, power per unit of production, total power, total number of employees, and production man-hours.

It was a standards-setting exercise, taken up by industrial nations and now a regular technique whose findings can be found in the annual volumes of statistics issued by governments all over the world. Scott’s theory of making energy into a currency was successfully resisted by orthodox economists who used errors in the energy survey to discredit the ideology and political program of the technocrats.

Their political program was outflanked by Franklin Delano Roosevelt’s New Deal, but their analysis of energy and material use was greatly developed and widely applied during World War II and afterward during the Cold War and the energy crisis of the 1970s. The major protagonists in the World War and the Cold War embraced Taylorism and Fordism to various degrees, helped or hindered by political and ideological factors.

Exploring the link between energy flows and money flows in the economy was continued and enjoyed considerable vogue in the late 1970s following the 1973 energy crisis. Despite quantification of energy investment in most goods and services, no national economy was placed on an energy-value basis. Orthodox economics and financial methods continued to dominate worldwide.

The rise of technocracy coincided with attempts to develop econometric analysis of engineering change and its consequences for the economy. Many technocrats employed econometrics, but not all econometricians supported technocracy. Christiaan Huygens, Christopher Polhem, Napoleon, Armstrong, and Jevons were a few of those who recognized the importance of engineering to a nation’s economy between 1600 and 1900, but they lacked a comprehensive model of economic growth related to history.

Between the world wars several comprehensive models were put forward. These models assumed that the global economy was dominated by a relatively small number of leader nations such as France and Britain in the eighteenth and nineteenth centuries and the U.S. and Japan in the late twentieth century. In 1925 N.D. Kondratieff argued that analysis of economic performance during the industrial period showed that it could be divided up into successive cycles of growth, prosperity, stagnation, recession, recovery, and so on.

He further claimed that these phases repeated themselves at regular intervals of about 53 years. As long as the structure of the model lacked a rational explanation and the precise periodicity was claimed, Kondratieff’s cycles were regarded as belonging to speculative metaphysics. During and after World War II, however, a school of econometrics developed that accepted the cycles as established by reliable data and looked for an explanation. S. Kuznets and Joseph A. Schumpeter argued that global economic history was associated with distinct phases that were caused by technological innovation. Innovation created new industries, and a relatively small number of industries cross-fertilizing each other launched a new era of economic development.

The industries that dominated the succeeding phase of economic growth were strategic industries, created by strategic innovations. They fostered new standards of workers’ skills and new management techniques, raised standards of required engineering science, and generated a fresh understanding of what the contemporary age meant by modern technology. In their periods of rapid growth, these industries were very profitable and attracted much investment.

G. Mensch argued that as they became established and less modern, these industries became less profitable and attractive to investors, although they could still be important in the economy. They might be profitable enough to make the investments in them worth maintaining, but eventually the diminishing returns on investment would encourage the creation of new, dynamic industries made possible by the most recent generation of technological innovations.

Supporters of this theory claimed evidence from history. The mechanized-industrial age was launched in Great Britain by industries based on coal, iron, and textiles with transport by canal. These began in relatively few centers (Ironbridge, Cromford, and Manchester). The skills cultivated at all levels in the ‘‘first industrial nation’’ could not be learned easily or quickly in other nations, and Britain enjoyed a practically unassailable lead.

The strategic innovations that created the industries that dominated the next phase were steam power, application of steam power to older industries, and railways. These grew out of the older technologies created in England, and so Britain enjoyed prolonged leadership in the global economy. Later, periods were dominated by new technologies created relatively rapidly and did not evolve out of older industries.

During such change points, leadership in economic growth passed to nations that developed the new skills and cultural values crucial during the next phase. Examples quoted were Germany and the U.S. in the period after 1890 when electrical engineering, industrial chemicals, and the automotive industry were strategic. Later still, electronics, aviation, rocketry, nuclear engineering, computing, and the technologies of the post-1945 age ushered in new phases of development and witnessed the rise of Japan.

Though some econometricians accepted the precise periodicity of the Kondratieff model (as did Mensch), a larger number accepted that the interpretation of industrial growth was roughly correct and could be used as a guide. Many were skeptical and regarded the lessons derived from the ‘‘long-wave analysis’’ as due to hindsight, although the classifications might be beneficial to historians. Philosophers were suspicious of implicit determinism and historicism in the models. Much criticism was directed against the creation of long-wave trend curves, or continuous traces obtained by plotting an index of economic performance against a measure of input to industry, or against time (date).

How could a major innovation be associated with a particular date? Was it legitimate to create a model by treating a succession of innovations as if each were equal in economic importance to the rest? Mensch’s work attempted to deal with this issue but continued to attract adverse criticism.

The use of trend curves played a major role in large-scale econometrics. Trend curves were also used on a smaller scale to judge the extent to which a particular technology, design, or product was worthy of further investment or was approaching obsolescence. If recognized as near obsolescence, it could be replaced by a successor introduced in an orderly manner, which reduced the waste of unused potential in the old technology.

The works of B. Twiss and R. Foster illustrate the use of S-curve analysis in management and business circles. Attempts to integrate small- and medium-scale S- curve analysis with the large-scale, long-term models of Kuznets, Schumpeter, and Mensch have not yet succeeded. These theories are often used as primarily qualitative guides based on history. As such, they provide valuable lessons.

They suggest that it is destructive of a nation’s standing, or an industry’s profitability, if the nation or industry maintains investment (including intellectual skills) in declining activities that were once strategic and fails to reorganize to take control of completely new strategic industries based on recent innovations. Industrial and economic leadership may be associated in future with global networks rather than individual companies located in one nation.

The changing nature of engineering is leading to industries based on nanotechnology, artificial intelligence, cybernetics, and biotechnical hybrids. The meaning of ‘‘industry’’ and ‘‘product’’ is being redefined. Contemporary and future industries may increasingly produce knowledge, patent rights, and licenses to manufacture as earlier industries produced steel and heavy equipment. The manufacture of older technologies is shifting to industrial cultures outside the first rank. This shift has caused widespread reorganization of engineering education and the profession in older industrial countries such as the U.K.

The 1973 energy crisis and the ongoing discussion concerning sustained growth, limits to growth, and environmental damage due to industrial activity gave a great impetus to neotechnocracy, long-wave econometrics, and engineer values. A few of the original technocrats still lived and carried on their original campaign, though technocracy, which survived as a movement, enjoyed little influence.

The growth of innovation analysis and the need to assess the worth of expensive military projects revived interest in technological forecasting, which received funds from military sources and other government departments. The anticipated shortage of fossil fuels in the 1970s and 1980s focused attention on using trend curves to assess nearness to exhaustion of resources. Use was made of similar trend curves to link industrial production to damage to the environment.

The link between energy consumption per head and GNP per capita was calculated for different countries at various stages of industrial development and used to calculate how much fossil fuel and raw materials would be needed to raise the poorer nations to the standard of living in the U.S. or Germany.

Though the link between GNP per capita and energy consumption per capita was condemned as misleading, the analysis indicated the probable impossibility of abolishing world poverty in this sense, taking into account population growth, lengthening life spans, annual expansion of the economy, and expectations of a regular increase in standard of living. During the 1970s, the Florida School of analysts, associated with H. T. Odum and E.C. Odum produced studies of energy flow correlated with money flow in society and linked money value to energy value, along lines similar to those pursued by the various technocrats in earlier years.

The Odums concluded that whereas lack of money in circulation was the problem in 1929, the cause of postwar economic crises was more likely to be limited access to cheap energy and raw materials. In the 1970s the aggressive ‘‘production engineer values’’ of the period from 1910 to 1940 were less in evidence. The ‘‘engineer values’’ and the technocracy were still there, but they were presented in a more circumspect manner and in closer association with a liberal, enlightened economics that accepted limits to growth on environmental grounds.

Development of these theories and philosophies continues, as does the clash between engineers’ values and economists’ values. Some states require that any energy-consuming scheme be subjected to an analysis beforehand to calculate the total energy and resources investment in the project compared with the anticipated benefits. Many nations now calculate, as part of the GNP assessment, the energy investment in the goods produced and services provided.